You also get the option of claiming the credit on either your 2009 tax return or waiting until you file your 2010 taxes next year. If you want to use the tax break on your 2009 return but your home purchase isn't completed until after April 15, you can file for an extension and then finish your taxes, including the credit, from the comfort of your new home.
In addition to the purchase deadlines and taxpayer ownership qualifications, income and home price limits also apply to the credit. You can find details in Bankrate's story, "Home tax credit extended, expanded."
3. PMI deductionTypically, if your home down payment is less than 20 percent, your lender will require you to buy private mortgage insurance, or PMI. This policy protects the lender if you default, but you must pay the premiums, usually as part of your monthly mortgage payment.
However, on certain home loans issued since 2007, these premium payments have been deductible as an itemized expense. This tax break is in effect for eligible new home loans issued through the 2010 tax year.
The Form 1098 or similar year-end statement you get from your lender should show the amount of PMI premiums you paid during the tax year. Enter that figure in the "Interest You Paid" section (line 13) of your Schedule A.
The amount of PMI you may deduct is limited if your adjusted gross income is more than $100,000 ($50,000 if married filing separately). You'll get no deduction if your adjusted gross income is more than $109,000 ($54,500 if married filing separately). A work sheet on Page A7 of the Schedule A instruction book, or your tax software, will help you calculate your exact PMI deduction amount.
4. Property tax addition to standard deductionAnother popular home-related tax break, the property tax deduction, also has been expanded.
Previously, real estate taxes were a welcome tax deduction for homeowners who itemized. These annual payments to county and local governments could be claimed on Schedule A to increase the taxpayer's deduction total.
Now, however, homeowners who do not itemize will get to claim at least a portion of their real estate tax payments as part of their standard deduction. Up to $500 for single homeowners, double that for joint filers, can be added to the taxpayer's standard deduction amount. This year, you'll also have to complete the new Schedule L to claim this amount as part of your standard deduction. You can find details on doing so in "2 big homeownership expenses to deduct."
5. Surviving spouse home sale tax exclusionA widow or widower has many difficult decisions to make soon after losing a spouse. But a provision in the Mortgage Forgiveness Debt Relief Act of 2007 now offers surviving spouses some tax relief in connection with one of those decisions, the sale of the family home.
In most cases, a seller can exclude up to $250,000 in profit from the sale of a primary residence. The tax-free amount is $500,000 when the home is sold by a married couple filing a joint return.