Homebuyer Credit

Recently, I posted about my renewed desire to purchase a home. Someone commented about what $8,000 credit I was referencing, so I did a bit more research.

There are currently two tax different, but mutually exclusive, new homebuyer credits.

1) If you purchased between April 8, 2008 - December 31, 2008, you are eligible for a 10% tax credit on the value of your purchased home, up to $7,500. This credit is essentially an interest-free loan for 15 years. More information can be found here: IRS link

2) If you purchase(d) anytime before December 1, 2009, qualify for a $8,000 credit that does not have to be paid back. Additionally, if the purchase is after April 15 (filing date for taxes), you can file an amended tax return. More information can be found here: IRS link

I had actually been wondering about what would happen if I purchased after taxes were due, since I could definitely use that $8K after I buy the house.

Tax Returns

Say what you will about the way the government runs, but this year, I am thoroughly impressed with the speediness of my tax refunds. This past Tuesday, I submitted by e-File both my Federal and State refunds. By Thursday, I had my State refund in the bank account, and by checking the "Where's My Return" on the IRS website, I know I will have my Federal return by March 24th.

As much as I hate to say, it does appear that the IRS has gotten more user-friendly.

e-Filing Taxes and Refund Tracking

I've been using tax prep software for my taxes the past two years, and I've really enjoyed the simplicity of it. This year, I had most of my information typed in, but I had been waiting for any new tax laws to go through.

While waiting, I had been debating the merits e-Filing like I did last year, or mailing in a paper copy. The only real detriment in e-Filing that I can discover, outside of paying a fee, is that it is easier for the government to audit your statements and make you pay more.

Well, I just take the standard deduction and I have some capital gains losses, so I don't have much to worry about.

I did however, discover an additional benefit: the government has a website setup to help track tax refunds, and for e-Filers, the tracking starts 72 hours after filing, rather than 3-4 weeks for the paper version.

The address is here: http://www.irs.gov/individuals/article/0,,id=96596,00.html

Fuel Tax Break

Every time I post an entry like this, I always preface that I rarely stray into politics on this blog. However, in the case of the fuel tax break, I have to because it relates directly to personal finance.

Let me state it plainly: suspending the fuel tax is stupid.

The fuel (gasoline) tax is a pure consumption tax whose proceeds are designated for infrastructure maintenance and expansion. Rather than taxing the population at large, the greater users of gas, and therefore of public infrastructure, bear the greater weight of the upkeep.

By suspending the fuel tax, where does the money necessary for infrastructure upkeep come from? Well, real taxes, since roads HAVE to be maintained. Essentially you would divert already earmarked funds into the roads, if not take out loans to pay for it.

Many argue that this is an elitist or rich man's argument. It is not. There are 3 primary reasons this is better for the average Joe:

(1) Rich people have more money. They can already buy more gas and keep prices high. If the price dropped, they would want even more gas. Gas will go back to that price, and you would still be in the same place.

(2) Before, rich people already drove more and therefore paid more to maintain the transportation infrastructure. Without those funds, the money would come from general tax revenues. In general, most people would think rich people are paying much less tax relative to average. By taking money from general taxes, we would only widen this gap.

(3) Gas prices are not high because of taxes; it is because we are in high demand of it. Keeping prices high forces efficient car technologies, such as hybrids, to be developed, both saving the environment and costing the average consumer less.

Remember that we elect politicians to make TOUGH decisions that affect the LONG term. If they made decisions based on what everyone wants in the short term, the country would be (already is?) in great trouble.

(And yes, I am an economist, so Hillary doesn't agree with me and believes I'm elitist for having studied economics and wishing to inform the world of my opinion. This, coming from a Yale graduate...)

Market troubles signals good times for some

The market helds its breath today, waiting to hear word on S&P ratings of bond insurers (such as MBIA and AMBAC). When it found out S&P was affirming the AAA ratings, markets soared.

This makes me laugh.

The very same institutions that are blamed for this subprime mess, rating agencies, still hold the same credibility?! It doesn't make any sense to me. I would think at this point, S&P would have very little value to investors, considering its ridiculous blunder.

But speaking of mortgages, this mornings report on existing home sales and prices was pretty glum for sellers, and continuing great news for buyers. Prices are down 4.6% compared to last year. At this rate, summer '08 is looking like a great market bottom to buy in.

For students graduating this year, this is excellent news. They are getting out at a time when interest rates are low, prices are low, and market is desperate to get rid of a 10-month glut of homes.

For myself, I am thinking about switching from leasing to buying as well. The tax benefits and equity are significant, IF I can foot the initial down payment. More to come later on this subject.

Stimulus Package

As I blogged before, I was waiting for word on the stimulus package before I would send in my tax forms this year. However, turns out, the stimulus package is a separate check (as noted by an alert reader) that is sent out to current tax payers. This means that those used to not paying taxes would still have to send in a tax form in order to collect the $600 per head stimulus.

You can read more here. But essentially, individual earners under $75K and for couples less than $150K. Those above that income will see the $600/$1200 slowly phases out.

This of course means I can send in my taxes this weekend, after I do a final once over.

Finished My Taxes!

Finally finished my taxes, and it looks like I'm going to get back about $2600! And that's before this Bush stimulus plan's $600 per person that is still being kicked around.

How did I do it so fast? Good records plus a software tax package helps a lot.

Some big places that helped with deductions were student loan interest, moving expenses related to my job, and investment losses. When you are doing your taxes, make sure to look into these large items.

There are also smaller items, that while I couldn't take advantage, you may be able to, such a child credit, charitable giving (only with receipts), and renewable energy usage (such as a hybrid car).

Unfortunately, now I'm left with the dilemna of getting my taxes in now or later. What happens if I send in my taxes and the stimulus bill is passed? Will I lose the $600 or will they send me another check later?

I'll have to investigate. Readers, if you know, please post.

Free Tax Software... for a price

Recently I mentioned H&R's TaxCut software was something I used to do my taxes. At that point, I also said I wasn't shilling for them. I still don't particularly want to, but since I did actually have a better experience doing my taxes with them than without, and since they're offering a copy of their software for free, here goes:

To the reader that posts an interesting tax story, you will receive one download of the TaxCut software free!

Note: Interesting story may include use of goat's blood as ink, last-minute taxi cab tax form drop-off, or simply a fun run in with the audit folks,

Comment away!

Tax Day

Eleven days until work starts, and what am I doing between now and then? Filling out my taxes.

Yes, very exciting stuff.

Anyway, thanks to TaxCut Pro (I'm not shilling for them), it was actually a mild dull head pain, rather than the usual full headache that requires an open bottle of advil and Jack Daniels.

I went through the usual deductions and income calculations, and the program spit out two things to check that I hadn't thought about:

1) IRA Contributions: theses are pre-tax deductions that can lower your taxable income. Read more about it here.

2) Job-related expenses: specifically job-search expenses. I thought I found gold here, except, as it turns out, if its your first job, it doesn't count. For all you "youn'uns" out there, that's bad news. For anyone who has been around the block, stuff some pre-tax expenses here!