Fixit: Tax filer must claim home-buyer credit

Q My daughter is buying a house for $65,000. Will the government give her $6,000 cash, as my daughter says, or does she have to declare it on her taxes to get the deduction?

A The 2009 home-buyer credit is worth 10 percent of the purchase price, with a maximum of $8,000 for a house purchased before Dec. 1, 2009. So for your daughter's $65,000 house, the credit would be worth up to $6,500 if she qualifies (less if she exceeds the income limits). See below.

The credit is paid after a qualifying taxpayer files a tax return claiming the credit (using the new IRS Form 5405, First-Time Homebuyer Credit). Because it's a tax credit (not a deduction), it will either reduce the taxpayer's tax bill or increase his or her refund, dollar for dollar. A taxpayer can claim the 2009 home-buyer credit on a 2008 tax return by filing an amended return (if they already filed their 2008 income tax return) or by filing their original 2008 tax return by the Oct. 15 extension deadline (if the purchase occurs before then).

Taxpayers also can wait until next year to claim the home-buyer credit on their 2009 tax return. For some taxpayers, it may make more financial sense to wait and claim the credit next year when they file the 2009 tax return rather than claiming it on a 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return, including those who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.

The 2009 home-buyer credit applies only to homes used as a taxpayer's principal residence. It's available to taxpayers buying a house for the first time or to a taxpayer if they (or their spouse, if married) have not owned a home in the three years prior to a purchase. The credit begins to phase out for taxpayers whose modified adjusted gross income is more than $75,000, or $150,000 for joint filers. It does not have to be repaid (like the $7,500 home-buyer credit available on 2008 home purchases) unless the home ceases to be the taxpayer's principal residence within three years of the purchase date.

For more information on the first-time home-buyer credit, visit www.irs.gov, keyword "First-time Homebuyer."

Carrie Resch, IRS

A No, not particularly. Although ovens and refrigerators are insulated, ovens generate heat that warms the surrounding air. The refrigerator next to it is using this air to cool the condenser coil. That means the task will be more difficult and could increase operating costs.

On the other hand, if that's the only way the kitchen can be configured, that's the way it will be.