Tax Savings for Homeowners
By: Mark Hostetler
The government is making it easy for homeowners to save on their taxes this year. Whether you're a first time buyer, or just renovating, there are a number of savings out there.
Save The Environment and Money Too!
Thanks to the $700 billion bailout plan, going Green in 2009 can net you some juicy tax credits. A number of incentives that are especially helpful for people living in older homes, include:
- Credit for 30 percent of the cost of a photovoltaic solar energy system. For a wind energy system a homeowner could receive up to $4,000 or 30 percent of the cost of installation of a home windmill system.
- A $1,500 credit for installing energy efficient windows, doors, water heaters, roofs, insulation, heating, or a central air system in 2009 or 2010.
Sell Your Home and Pocket the Profit
Selling your home at a profit provides a juicy tax break if it was your main residence for at least two of the past five years. Singles don’t pay taxes on profits of up to $250,000, and married couples have a $500,000 threshold. If, you owned the home for less than two years you may still qualify for gain exclusion if you sold your home due to job, health or unforeseen circumstances (such as divorce or death). Ensure that you have the necessary documents to back up your claim, such as a doctor's letter.
Your First Home Tax Credit/Loan
First time home buyers are entitled to a $7,500 tax credit if they earn less than $75,000 a year (couples may earn up to $150,000). If a buyer has not owned a home in the past three years, and falls in the eligible income range, they can take a tax credit worth 10% of the home's sale price, up to a maximum of $7,500. This applies to homes that have closed between April 9, 2008 and before July 1, 2009, and can be applied to either the 2008 or 2009 taxes.
The really nice part of this tax perk is that it is a true credit. If you owe $8,500 in taxes, the $7,500 credit comes off the top, leaving an amount owing of only $1,000. In addition, it is refundable, which means if you owe less than $7,500 in taxes, the government will send you a check for the difference.
Now, the clincher. Not only is this a refundable tax credit, but it's also a loan. This means that within two years buyers must begin paying it back at no more than $500 per year for 15 years. If the home is sold during that time, the amount is withdrawn from the profit. If there is no profit, the loan slate will be wiped clean.
Save on Property Taxes
There are a few things a homeowner can do to potentially save on property taxes:
Look for errors – up to half of property assessments are inaccurate. Ensure that your ¾ acre property is not being assessed at 1 3/4 acre, or that you aren't being charged for 4 bathrooms when you only have 2. What seems like a small difference could add up to big savings at tax time.
Property assessments are generally based on market value. If your home was evaluated before housing prices fell, it should be re-assessed based on today’s market value. Do some investigating and find out what similar homes in your area have been selling for. They should be in the same school district, have a similar lot size, same number of bedrooms and bathrooms. You will need to demonstrate that these comparable houses have sold for less than the city's assessed value of your home.
If you are over paying, file an appeal with your town. This is something you can do on your own, without spending money on lawyer's fees.Pick up a property tax-reduction kit from the American Homeowners Association or the National Taxpayers Union and it will guide you through the process.
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