J.W. ELPHINSTONE--AP Real Estate Writer
When it comes to the $8,000 tax credit for first-time homebuyers, it seems there's a new program every week to help tap that money today.
The credit can be claimed on 2008 or 2009 tax returns. Homebuyers who get a loan backed by the Federal Housing Administration can use the money to cover closing costs and other fees, and at least 10 states offer ways to use the tax credit faster.
"There are some real neat tax planning strategies you can apply now," said Bob Meighan, vice president of TurboTax.
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To be eligible, a buyer cannot have owned a home in the past three years. So if you're ready to buy, here are some tips:
INCOME CONSIDERATIONS: The tax credit, for home purchases made through end of November, comes with income thresholds, $75,000 for individuals and $150,000 for joint filers. After those limits, the credit begins to phase out. If you bought a home this year and expect your 2008 income to be lower than next year's, it makes sense to file for the credit this year using a 2008 amended return.
However, if you think your income will decrease, due to job loss, wage cuts or hour reductions, it makes more sense to file for the tax credit on your 2009 tax returns to get the most out of the credit, Meighan said.
TAX WITHHOLDING: Another benefit to waiting until 2009: You can increase your take-home pay. By taking the credit next year, you can change your tax withholding status with your employer now and get more on a paycheck-to-paycheck basis, Meighan said.
You'll be giving up a "fatter" tax refund next year, but each month you'll have more change in your pocket.
Also, don't forget to reduce your federal and state tax withholding to account for the tax deduction you can take on the mortgage interest and property taxes you pay.
BRIDGE LOANS: Ten states (and the list keeps growing) are offering so-called "bridge loans" for the federal tax credit, so homebuyers can take advantage of the $8,000 before the 2010 filing season. Qualified homebuyers in Colorado, Delaware, Idaho, Kentucky, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania and Tennessee can receive a loan with little to no interest and repay it with the tax credit refund next year.
"I see it as an upside," Meighan said. "It gives homebuyers more flexibility," with the money.
Each state program varies and some require a minimum down payment contribution from the buyer.
Some nonprofit organizations like NeighborWorks America are also offering bridge loans for the tax credits.
