The IRS released a notice recently concerning an obvious contradiction:
- The deadline to purchase a home and potentially qualify for the 2009 first time home buyer tax credit is November 30, 2009.
- You can claim this $8,000 refundable tax credit on your 2008 tax return.
- Your 2008 tax return is due April 15, 2009.
You: So how can I claim a credit on my 2008 tax return if I haven’t purchased a home by April 15?
Here are your options:
- Extend your tax return. File Form 4868 and automatically receive a six-month extension to file. Note, this is not an extension of time to pay your taxes if you think you’ll owe. Then again, will you owe after factoring in that $8,000 tax credit?
- File now. Amend later. Another option is to file your return on time and then file an amendment (using Form 1040X) after you close on your home. Presto: up to $8,000 back in your pockets!
- Claim it in 2009. You don’t have to take the first time home buyer credit in 2008. Instead, you can choose to take it in 2009. For some people, this may actually be better.
You: But what about the time value of money? Better to receive a dollar today (or 8,000 of them!) than a dollar next year, right?
Absolutely. However, for some people the choice may be $5,000 today or $8,000 in a year.
You: How come?
If your income is too high in 2008 to receive the full credit and you think you might make less money in 2009, it may pay to wait to take the credit until then. Remember, the income limits for the full credit are $75,000 MAGI if filing as a single person and $150,000 if married, filing jointly.
You: What if I already filed my 2008 tax return, subsequently buy my first home before December 1, and want to take the credit on my 2008 tax return? Can I still do that?
Absolutely. See option number two above: amend.
Other related reading:
- All about the 2009 First Time Home Buyer Credit (tons of Q & A)
- If you purchased a home in 2008, read this post about the 2008 version of the first time home buyer credit. (plenty of Q & A there too)
- Curious as to my thoughts about the housing market? Read Is it time to buy a home yet where you live?
Or, just ask a question or make a comment below. Good luck!