20080812 tax form 18
Tax form with pencil pointing to "Amount you owe" - 


TESS VIGELAND: Alright folks, are you really going to wait until just days before the deadline? And rush to the post office at midnight on April 14? If you are, indeed, among the millions who still have not done their taxes, this next segment is for you. There've been quite a few changes in tax law what with this housing credit and that stimulus check. So here to help us sort it all out is tax analyst Mark Luscombe. And Mark, I think lots of folks are confused by the differences in these two housing credits that lawmakers passed over the last year. Shall we start there?

Mark Luscombe: Congress can never make anything simple, can they?

VIGELAND: Of course not.

Luscombe: So yes, the 2008 legislation created this credit, which for 2008 was $7,500. You have to be a first-time homebuyer, which means you can't have had an ownership interest in the principal residence for the last three years.

VIGELAND: Yeah, I always loved that, that the first-time homebuyer doesn't actually have to be a first-time homebuyer.

Luscombe: Right. You always have to look at the definitions.

VIGELAND: OK, so this is the, again the one that if you bought in 2008 you can claim this on this year's tax form. But this is the one that has to be paid back, right?

Luscombe: Correct.

VIGELAND: Alright, well let's go through the 2009 legislation. This is for anyone who bought between Jan. 1 of this year and Dec. 1 of this year. And this is up to $8,000 and you do not have to pay it back.

Luscombe: That's correct. The only sort of caveat on not having to pay it back is you do have to keep the home as your principal residence for three years after the purchase to avoid a pay-back obligation.

VIGELAND: OK. Now, if you have done this this year, if you've bought this house in 2009 and you qualify for this credit, you can claim it on your 2008 tax form, correct?

Luscombe: That's correct. For a 2009 purchase, you can elect to claim it either on your 2009 or your 2008 return. And obviously, there could be advantages to claiming it on your 2008 return, because then you get the money sooner and maybe perhaps fairly close to when you're actually closing and might need the money.

VIGELAND: Let's then go to the Recovery Act, which was the stimulus of 2008. There is basically a catch-up: If something in your life changed last year.

Luscombe: Right, that's basically correct. The problem with the payment is they didn't obviously have the 2008 return information when the payments went out, so those were based on 2007 return information. Say, if you had an additional child born in 2008, or some other factor came into play, your income level changed, you might qualify for an additional credit in excess of the amount of the payment that you got last year.

VIGELAND: Let's go through a few of the factors that might come into play for folks given what has happened in the economy over that last several months. Starting with people who have taken money out of their 401(k) retirement plans -- say they were laid off, they needed more money -- they need to be paying attention to their taxes now.

Luscombe: There was discussions in Congress about providing some relief for those people, but none was really provided. So if they were underage, 59 and a half, when they took those distributions from their 401(k), more likely from an IRA, they're going to not only have to pay tax on that, they're also going to have to pay a 10 percent penalty unless they fell within some special exception to the penalty rules. And some of those exceptions would be for things like unemployment insurance, or education expenses, or a first-time homebuyer.

VIGELAND: And I think I remember from last year one of the new additions to tax law had to do with if you were a victim of a natural disaster.

Luscombe: Basically what Congress did was apply some of the Katrina relief provisions that are still sitting in the tax code and extended them and applied them to about a 10-state area involving Midwest floods, and then just a very few provisions for Hurricane Ike. But the other thing that they did, which was sort of novel, was they said that if there are future federally declared disasters in 2008 or 2009, some of these relief provisions automatically come into play.

VIGELAND: And what exactly is the relief?

Luscombe: Well, it's a whole list of things. One of the common things is normally you can't get a casualty loss for less than 10 percent of adjusted gross income, and also for 2008 there's a $100 floor on any one loss. There have been waivers of those limits so that you can a take dollar-for-dollar casualty loss as an itemized deduction.

VIGELAND: So if you, for example, lost your entire $150,000 home, you can get that dollar-for-dollar as a credit, or a deduction?

Luscombe: A deduction, as an itemized deduction.

VIGELAND: Alright. Well, that's a lot to go through. As people are, you know, perhaps preparing their taxes this weekend, heading toward the deadline, what's the most important advice that you can give to them?

Luscombe: Well probably just do it very carefully and very thoroughly because there are a lot of changes and sometimes these new things just fall through the cracks. A couple of other new things that we haven't talked about, is there's a couple of additional standard deductions applicable for 2008. And you know, usually the only additional standard deductions, which have been around for years, are for people who are over age 65 or are blind. But for the first time in a long time we've got a couple of additional ones -- ones for real estate taxes, and another one is again for disaster losses. So again, people who maybe don't itemize, but take the standard deductions, should make sure that they don't overlook some of these additional standard deductions.

VIGELAND: Mark Luscombe is the principal federal tax analyst for CCH, that's a tax and business law information and software firm. Thanks so much for the help today.

Luscombe: Thank you.

Follow Tess Vigeland at @tessvigeland