Claiming this year's first-time home buyer's tax credit is easy
— -- You've found a charming bungalow in a nice neighborhood at a price you can afford. Mortgage rates have never been lower. You've even managed to come up with a 20% down payment. There's just one problem: The Pepto Bismol-colored carpet in the family room is not to your taste, and you don't have any money left for hardwood floors.
Well, you may not have to live with that hot-pink rug for long. A provision in the economic stimulus bill enacted this year provides a tax credit of up to $8,000 for first-time home buyers. Unlike the $7,500 tax credit enacted last year, this credit doesn't have to be repaid. And you don't have to wait until you file your 2009 tax return to get your money.
The tax credit is available for first-time home buyers who purchase a home before Dec. 1. You can claim the credit on your 2008 or 2009 tax return, according to the IRS. However, you can't claim the credit until after you've purchased your home. Home buyers who want to claim the credit on their 2008 tax return have these options:
File for an extension
This will give you until Oct. 15 to file your tax return. Once you close on your home, you can file your taxes and claim the credit. Taxpayers who file their taxes after receiving an extension can still file electronically, the IRS says. By e-filing and arranging for direct deposit, you can get your refund in as few as 10 days.
To request an extension, file Form 4868 by April 15. Most tax software programs will help you file an extension. If your 2008 adjusted gross income is $56,000 or less, you can file an extension using Free File, a partnership between the IRS and tax software companies. You can find more information at www.irs.gov.
Remember, though, that if you owe money to the IRS, filing for an extension doesn't give you more time to pay.
File now and amend later
Suppose you're due a large refund and don't want to wait to get your money. You can file your 2008 tax return, pocket your refund and file an amended return after you close on your home.
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