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Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
Homeownership And Your Taxes
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Homeownership And Your Taxes

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  • 1. Homeownership and Your Taxes Isaias C. Sarmiento Financial Literacy Coordinator Quincy Community Action Programs, Inc.
  • 2. Form 1040 (page 1)
    • Income (Lines 7-21)
    • Adjustments (Lines 23-35)
    • Adjusted Gross Income: AGI (Line 37) = Income – Adjustments
  • 3. Form 1040 (page 2)
    • AGI (Line 38)
    • Standard deduction or itemized deductions, whichever is greater (Line 40)
    • Exemption of $3650 per person (Line 42)
    • Taxable Income (Line 43) = AGI – ( standard deduction or itemized deduction , whichever is greater) – exemption
  • 4. Your Tax
    • Taxable income (Line 43)
    • Tax (Line 44)
      • The tax is based on your taxable income.
      • The tax is the amount that really belongs to the federal government.
      • It can be reduced by credits, e.g. child tax credit, child care expenses, education credit.
  • 5. Standard Deduction
    • You are entitled to a standard deduction based on your filing status...
    Standard Deduction (2009) Filing Status $11,400 Married Filing Jointly $8350 Head of Household $5700 Single Married Filing Separately
  • 6. Itemized Deduction
    • …or you can take an itemized deduction if certain expenses add up to more than your standard deduction.
    • You can take only the standard deduction or the itemized deductions, both not both.
  • 7. How much in taxes will you save if you itemize? (Single people)
    • Scenario 1
    • Single, no children AGI: $40,000 1 personal exemption of $3650
    • Standard deduction of $5700
    • Taxable income: 40,000 – 3650 – 5700
    • = $30,650
    • Tax: $4180
  • 8. How much in taxes will you save if you itemize?
    • Scenario 2
    • Single, no children AGI: $40,000
    • $200,000 mortgage for 30 years, 5.5% rate Itemized deductions of $14,713
    • Taxable income: 40,000 – 3650 – 14,713
    • = $21,637
    • Tax: $2828
  • 9. How much in taxes will you save if you itemize? (Married people)
    • Scenario 1
    • Married filing jointly, 1 child AGI: $40,000 3 personal exemptions: $10,950 ($3650 X 3)
    • Standard deduction of $11,400
    • Taxable income: 40,000 – 10,950 – 11,400
    • = $17,650
    • Tax: $1813
  • 10. How much in taxes will you save if you itemize? (Married people)
    • Scenario 2
    • Married filing jointly, 1 child AGI: $40,000 3 personal exemptions: $10,950 ($3650 X 3) $300,000 mortgage for 30 years, 5.5% rate Itemized deductions of $19,597
    • Taxable income: 40,000 – 10,950 – 19,597
    • = $9453
    • Tax: $945
  • 11. What qualifies as itemized deductions?
    • Mortgage interest
    • PMI (private mortgage insurance)
    • Points
    • Real estate property taxes
    • State taxes withheld
    • Personal property taxes (e.g. excise car tax)
    • Charitable contributions
    • Unreimbursed medical expenses
  • 12. What qualifies as itemized deductions?
    • Unreimbursed employee expenses
    • Investment expenses
    • Casualty and theft losses
    • Gambling losses to the extent of gambling winnings
    • Hobby losses to the extent of hobby income
  • 13. Mortgage Interest and Real Estate Property Taxes
    • Shown on Form 1098 that you get from your mortgage company.
  • 14. State Income Taxes
    • You can get a deduction for state income taxes withheld.
    • State refunds are NOT taxable income if didn’t itemize deductions the previous year.
  • 15. State Income Taxes
    • If you itemize deductions and you get a state refund, then the refund is taxable income on your federal return the following year.
    • If you itemize deductions and you owe state taxes, then you can deduct the taxes on your federal return the following year.
  • 16. Charitable Contributions
    • You can deduct charitable contributions, but you must have written proof.
      • Cancelled bank check
      • Document from the organization
  • 17. Unreimbursed Medical Expenses
    • You can deduct expenses for you, your spouse, or a dependent.
    • Deduction = Medical expenses – 7.5% of AGI For example, medical expenses = $3000. If AGI = $30,000, then 7.5% of AGI is $2250. That means you can deduct only $750 ($3000 – $2250) of your medical expenses.
  • 18. Unreimbursed Employee Expenses
    • Deduction = Employee expenses – 2% of AGI For example, employee expenses = $3000. If AGI = $30,000, then 2% of AGI is $600. That means you can deduct only $2400 ($3000 – $600) of your employee expenses.
  • 19. Tax Planning
    • If you buy a house early in the year, you are more likely to itemize deductions for that year.
    • If you buy a house late in the year, you are less likely to itemize deductions for that year.
  • 20. Tax Planning
    • In the early years of homeownership, you pay a lot of mortgage interest, so you’re more likely to itemize deductions.
    • In the later years of homeownership, you pay little in mortgage interest, so you’re less likely to itemize deductions.
  • 21. First-Time Homebuyer Credit
    • A first-time homebuyer is anyone who hasn’t owned a home and used it as a principal residence for the 3 years prior to the date of purchase.
    • Credit is 10% of the purchase price of the home, up to $8000, for buying a home in the United States between January 1 and November 30, 2009. This is a refundable credit.
    • The credit phases out if your income is more than $75,000 ($150,000 for married filing jointly).
  • 22. First-Time Homebuyer Credit
    • You do not have to repay the credit as long as the house is your principal residence during the 3 years after you buy the house.
    • If you buy your first home in 2009, you can claim the credit on your 2009 tax return or on an amended 2008 tax return.
    • When you file your federal taxes, you need to complete Form 5405.
  • 23. Tax Credit Advance for FHA loans
    • If you’re getting an FHA-insured loan, you can apply up to the maximum tax credit as additional down payment, other closing costs, or buying down the interest rate.
    • The tax credit cannot be used to meet your 3.5% minimum down payment.
  • 24. Tax Credit Advance for MassHousing Loans
    • If you’re getting a MassHousing loan, you can apply up to the maximum tax credit as a loan toward closing costs.
    • If you don’t pay back the tax credit loan by June 1, 2010, then the loan amortizes over 10 years at the same interest rate as the first mortgage.
  • 25. Energy Efficiency Tax Credit
    • Credit of 30% of the cost of qualifying improvements up to $1,500
    • Credit available for 2009 and 2010
    • Qualifying improvements include:
      • adding insulation
      • energy-efficient exterior windows, doors, skylights
      • energy-efficient heating and air conditioning systems
      • natural gas, propane or oil water heaters
  • 26. IRS Resources
    • Pub 530: Tax Information for First-Time Homebuyers
    • Pub 936: Home Mortgage Interest Deduction
    • Pub 526: Charitable Contributions
    • Pub 502: Medical Expenses
    • Pub 529: Miscellaneous Deductions
  • 27. IRS Resources
    • All itemized deductions
    • http://www.irs.gov/taxtopics/tc500.html
    • Home energy credits
    • Go to www.irs.gov . Type in the search engine “ Energy-Saving Steps This Year May Result in Tax Savings Next Year.”

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