March 30, 2009
Monday

With the April 15 tax deadline fast approaching, here are answers to some tax questions from readers.

Q: Is there anything in the stimulus act that will affect my 2008 tax return?

A: Very little. Almost everything in the American Recovery and Reinvestment Act, signed in February, affects tax years 2009 and beyond.

One exception: If you buy a new or existing house between Jan. 1 through Nov. 30 of this year, you could get a first-time home buyer credit equal to 10 percent of the purchase price up to a maximum of $8,000. You can claim this credit on either your 2008 or your 2009 federal tax return.

To qualify, the house must be your main house and you (and your spouse, if married) haven't owned another main home during the three-year period ending on purchase date. The credit phases out and eventually disappears if your adjusted gross income exceeds $75,000 (single) or $150,000 (married filing jointly). You do not have to repay this credit if you stay in the home for three years.

For a home you construct, the purchase date is the date you first occupy the home.

If you haven't filed your 2008 return and plan on buying a home soon, you can either file for an extension on your 2008 return (although you must pay any taxes due by April 15 or face a penalty) or file an amended 2008 return after you buy the house. You also could wait and claim the credit when you file your 2009 return next year.

Another exception: For some small businesses, changes in the net operating loss provisions could affect 2008 tax returns.

Q: Can I get a first-time home buyer credit if I bought a home in 2008?

A: Possibly, but the rules are somewhat different.

If you bought a main home after April 8, 2008, and before July 1, 2009, you might be eligible for a credit equal to 10 percent of the price up to $7,500. This credit is more like an interest-only loan because it must be repaid over 15 years.

If you owned a home in the previous three years you won't be eligible. Income limits also apply.

Q: If two unmarried people buy a home together, such as a father and son, and one has owned a home in the last three years but the other hasn't, can the one who hasn't claim the first-time home buyer credit?

A: Yes, says IRS spokesman Jesse Weller. If two unmarried people buy a main home together and one person qualifies for the credit and the other does not (because of the income limits, or the person has owned another main home in the last three years), the full amount of the credit up to the maximum may be allocated to the buyer who qualifies for the credit.

Q: Is money you receive for a bodily injury claim taxable?

A: It depends on what the award is actually for, what the money replaces, and how the settlement or court award is worded, Weller says.

In general, compensatory damages you receive for physical injury or physical sickness are not taxable. But a bodily injury award also may include punitive damages or compensation for lost wages or lost profits, which usually are taxable.

Other awards that generally are taxable include interest on any award, back pay and damages for emotional distress received to satisfy a claim under Title VII of the Civil Rights Act of 1964 and attorney fees and costs (including contingent fees) where the underlying recovery is included in gross income. The details are tricky so it's best to consult a tax adviser.

SitNews ©2009
Stories In The News
Ketchikan, Alaska

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