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Wednesday, February 15, 2012

Individual Credits Very Limited Now

Individual Credits

First-time homebuyer credit. “The first-time homebuyer credit is much more limited this year,” said Langley, who stated that the $7,500 credit has expired in 2012 for most taxpayers. Some members of the foreign service or military who were not living within the United States and were able to take advantage of the credit still qualify. The few who do qualify cannot electronically file their returns. They must file on paper.

Additionally, those who claimed the credit in 2009 and 2010 and have since sold their homes must repay the credit. “But if there was no gain from the sale, no tax is really due. They just have to do some paperwork,” said Langley. Taxpayers repaying the credit from 2008 can now repay the credit directly on Form 1040, U.S. Individual Income Tax Return , or 1040NR, U.S. Nonresident Alien Income Tax Return, rather than by filing Form 5405, First-Time Homebuyer Credit and Repayment of the Credit.

Energy credit. The energy credit meant to help taxpayers offset the costs for installation of qualified energy efficiency improvements is more limited. “Not many taxpayers will be eligible for it,” Langley noted. A taxpayer may claim credits of up to $500 in his or her lifetime, including a maximum of $200 for replacement windows.

Earned income credit. A refundable earned income credit (EIC) is available to certain low-income individuals whose adjusted gross income (AGI) is below a certain level and who have a valid Social Security number, use a filing status other than married filing separately, are U.S. citizens or resident aliens, have no foreign income, and do not have investment income above a certain amount. Many taxpayers have incorrectly claimed the credit in the past.

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