March 3, 2014
I Just Bought A House: Part 2 - Tax Credits
I just bought a house! What tax credits can I get? This blog post will explain what credits you may claim if you own a house.
You may know that there are significant tax advantages to owning your own home. However, these benefits are often confusing to homeowners! The rules are constantly changing; and there are many variables that impact the different benefits. If you haven’t already read Part 1 of this topic, please click there now to learn about the tax deductions available to homeowners.
Home-Related Tax Credits
There are two ways to lower your taxes – deductions and credits. A credit is an amount that you subtract from your tax liability, thereby reducing your tax dollar-for-dollar by the amount of the credit. For this reason, credits can be much more beneficial to a taxpayer who might otherwise have a tax liability. There are a few tax credits that have been available to homeowners in recent years:
First-Time Homebuyer Credit – This credit was available in 2008, 2009, and 2010. Although it was called the “First-Time Homebuyer Credit,” it was also available to long-time homeowners purchasing a new home (under certain circumstances). This credit is no longer available, but some homeowners are required to repay the credit. The 2008 credit of $7,500 is required to be repaid at $500 per year until it is repaid in full (if the house is sold before it is fully repaid, it must be repaid in the year of sale). The 2009 and 2010 credit of $8,000 is not required to be repaid unless the house ceases to be the “main home” within 36 months of purchase.
Residential Energy Credit – This credit was available in 2006 and 2009-2013. As of the writing of this blog, the credit has not been renewed for 2014. This credit includes two sections:
Nonbusiness Energy Property Credit – You may claim a credit for 10% of the purchase price (not including installation) of certain insulation, windows, doors, air conditioners, furnaces, water heaters, and roofs that meet Energy Star guidelines. There is a $500 lifetime maximum on this credit.
Residential Energy Efficient Property Credit – You may claim a credit for 30% of the cost of the following energy efficient systems: qualified solar electric, solar water heating, small wind energy, geothermal heat pump, and fuel cell properties. There is no limit to this credit, and any unused portion can be carried forward to next year’s tax return.
A Mortgage Credit Certificate (MCC) is a certificate issued by a state or local government that allows a taxpayer to take a credit for a portion of his or her mortgage interest (instead of the mortgage interest deduction that all taxpayers receive). Usually there are qualifications for receiving an MCC that are based on income, previous homeownership status, purchase price, and location. The Iowa Finance Authority (IFA) just announced that they will be offering MCCs under the 2014 Take Credit Mortgage Certificate Program starting on February 3, 2014. Check with your state or city to see if you could qualify; and often banks or mortgage lenders are able to assist you with this program.
This about sums it up for home-related tax credits! Please contact me to discuss your specific situation.