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By Tara-Nicholle Nelson | Broker in San Francisco, CA

The Top 5 Tax Perks for Buyers, Sellers and Homeowners - 2009 Tax Edition

The Top 5 Tax Perks for Buyers, Sellers and Homeowners - 2009 Tax Edition

by Tara-Nicholle Nelson
Trulia's In-house Consumer Advocate

It's tax time, but it doesn't have to be excruciating, especially if you bought, sold or owned a home in 2009.  While so many of us think of tax time as time to write a check, the Obama Administration's stimulus package promised to reverse that tradition, effectively writing a check (in tax credit format) to buyers, sellers and even  short sellers and those who lost a home through foreclosure.

Take this quick list of tax tips to your personal tax guru and cash in your check from Uncle Sam!

    1.  2009-10 First-time Homebuyer
     Tax Credit
  • Who It Helps: Recent (or current!) homebuyers who had not owned a home in the 3 years prior to buying, but bought one in 2009 or this year (must be in contract on or before April 30, 2010).  Depending on when you bought (or buy! there's still some time left!) income and purchase price limits may apply.
  • How It Helps: Depending on your income and purchase price, you can receive up to an $8,000 fully refundable tax credit.  (That means if you were already getting a refund, you'll get a bigger one!) You can claim the credit on your 2009 tax return (the one you file on April 15th), even if you bought in 2010.
  • IMPORTANT NOTE: Per the IRS website, "because of the documentation requirements for claiming the credit, taxpayers who claim the credit on their 2009 tax return must file a paper — not electronic — return and attach Form 5405."

        2.  2009-10 Move-Up Buyer Tax Credit
    • Who It Helps: Current homeowners who have lived in the home they are selling, or have already sold, as their principal residence for five consecutive years of the last eight years who closed escrow between November 7, 2009 and July 1, 2010, so long as they are in contract on or before April 30, 2010.
    • How It Helps: Eligible homeowners can receive a tax credit of as much as $6,500, depending on income. You can claim the credit on your 2009 tax return (the one you file on April 15th), even if you bought in 2010.
          • IMPORTANT NOTE: Can't e-file to collect this one, either - see #1, above.

              3.  Energy Efficient Housing Tax Credits
          • Who It Helps: Homeowners who invested in making their homes more energy-efficient in 2009 and 2010.
          • How it helps: Offers them a 30 percent tax credit on qualifying purchases of energy-efficient furnaces, windows and insulation.

              4.  Private Mortgage Insurance Deduction
          • Who It Helps: Homeowners who bought a home in 2009, and put less than 20 percent down on their homes. These are the folks whose lenders required them to pay for PMI, or private mortgage insurance.
          • How It Helps: Allows them to deduct the costs - upfront and monthly - of PMI.

              5.  The Mortgage Forgiveness Debt Relief Act 

          • Who It Helps: Short sellers, owners who lost homes through foreclosures or had their mortgage balance reduced through loan modifications.
          • How It Helps: Normally, when a loan is cancelled or forgiven through, for example, a short sale or foreclosure, the cancelled debt is transformed into taxable income - and the IRS comes looking for their cut.  Under this Act, qualifying mortgage debt forgiven through foreclosure, short sale or loan modification is allowed to be excluded from taxable income.  The forgiven mortgage debt must be a loan on your personal residence, and must be related to the purchase of your home (if you pulled a bunch of cash out and did a short sale on that mortgage, you might not qualify).

          On top of these above-and-beyond tax credits, deductions and exemptions, longtime and brand-new homeowners should also look forward to claiming meaty tax deductions for basic closing costs (origination fees, taxes and points - oh my!), property taxes and mortgage interest deductions.

          As always, talk to your tax preparer to see if you qualify for any of these tax perks.  And don't delay - the countdown to April 15th is on.


          By Mim Heisey,  Thu Mar 25 2010, 06:08
          Great article. very timely. Especially like the reminder that "green" is green in more ways than one.
          By Pete Flint,  Thu Mar 25 2010, 06:18
          Great article! Now that reminds me that I need to do my taxes this weekend...
          By Patricia Scord,  Thu Mar 25 2010, 07:03
          Good article. Being a realtor, I will print this out and hand to my buyers and sellers. Thank you
          By Julie Nettleton,  Thu Mar 25 2010, 07:09
          Anytime we can refresh our brains to all the deductions the buyers can receive it's a good thing. Thanks for the article.
          By Richard Irish,  Thu Mar 25 2010, 08:26
          Thanks for that helpful article.
          By Gary M. Buck,  Thu Mar 25 2010, 08:35
          Someone should inform the tax preparers about the consumer’s ability to claim the tax credit for a home they purchased in 2010 on their 2009 tax return. H&R Block told one of my clients that it was not possible to do so.
          By Ann-Marie Bailey,  Thu Mar 25 2010, 08:55
          Great article. Helpful reminder for clients also.
          By Warwick REICH,  Thu Mar 25 2010, 08:59
          What about selling a primary residence for a loss. Taking a huge loss but not a short sale nor a foreclosure just a regular sale for less than what was originally paid. Can this be used as a deduction on one's taxes?
          By Tara-Nicholle Nelson,  Thu Mar 25 2010, 13:55
          @Gary M. Buck - that's too bad - it's clearly the rule:

          "For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return."

          Source: http://www.irs.gov/newsroom/article/0,,id=204671,00.html
          By Donna Mallinger,  Thu Mar 25 2010, 17:43
          Great article. I am doing an open house this Sunday and will print out for buyers to take home with them and read.
          By Keoki,  Thu Mar 25 2010, 18:40
          Great article and the elimination of IRS recapture on loan modifications was very much needed and has not been adequately covered elsewhere. G. N. Burkhardt
          By Anita,  Thu Mar 25 2010, 23:11
          # 5.....................what about for a rental property being shortsaled? If anyone has a clue please contact me at Anitamich@aol.com.
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          James Smith
          By Home Buyer,  Fri Mar 26 2010, 17:07

          My question is a little bit off track. It's a bout first time home buyer.
          What is the main criteria that one lives in the home

          My friend is going to buy a house in an east cost state, but he has to teach in a other state, while he is looking for job where he is buying the house.
          Of course he intends to use it as his main residence, but not right the way. What can he do in order to show that the home he buys is for him to live, not for rent?
          By Kelly Pollard,  Fri Mar 26 2010, 20:25
          great information - I printed it out for my buyers and sellers. Thanks!
          By Tara-Nicholle Nelson,  Fri Mar 26 2010, 22:36
          Thanks, everyone - I'll try to get to some of these other questions in this blog soon. You're all welcome to share this with as many folks as you'd like - I only ask that you attribute it to Trulia.com!
          By Jamy,  Sat Mar 27 2010, 07:47
          I hope someone can answer this one.

          Is mobile home consider home ?
          I bought a mobile home cash on 2001, now I am selling it and already signed contract on a new house.
          Am I qualified for 1st time buyer or Move-Up Buyer Tax Credit

          Thank you in advance.
          Jamy Tan
          By Brenda Rodie,  Sat Mar 27 2010, 18:36
          This is great information to pass on to all of my clients........and friends!
          By Kupke & Tackett, REALTORS®,  Tue Mar 30 2010, 11:21
          Great blog post and great timing. I always like to point out these credits and deductions to my clients as well. There is so much more than the first time home buyer credit.... the energy efficiency credits among them, as you point out.
          By Martin Feinberg,  Thu Apr 1 2010, 11:12
          Excellent article! Very useful information.
          By Johnathan Mullaney,  Thu Apr 1 2010, 16:19
          Everything else is going up, take advantage of the money!
          By Cinnamon Boffa,  Thu Apr 1 2010, 18:45
          Good information. I also notice alot of people are forgetting about the credit for Making work pay credit/ gov't retire credit. Schedule M
          By Courtney Cooper,  Mon Apr 5 2010, 11:30
          Tara - Nicolle, what a great article! Thanks so much for posting!
          By PHYLLIS SHELTON,  Tue Apr 6 2010, 14:21
          Great article, Thanks so much!

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