One of the great benefits of owning a home is deducting the mortgage interest you pay each year. But what about rental expenses for investment properties? Painting costs for new renters? In this episode of the podcast, Marc Heller, Partner at Warady & Davis, LLP, discusses real estate tax deductions, how they’re itemized & structured, and how they apply to homeowners.

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Special Guest Marc Heller, Director of Technical Tax and Partner at Warady and Davis LLP, stops by to discuss intricacies and components within the first-time homebuyer tax credit — and it’s upcoming expiration on November 30, 2009.

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As Labor Day approaches, buzz about the governments 2009 first-time homebuyer tax credit is growing, and its upcoming November 30th expiration date is dominating conversations in the real estate industry. Marc Heller, Director of Technical Tax and Partner at Warady and Davis LLP, helped synthesize some intricacies within the credit:

How do I apply for the tax credit?
First, contact your CPA to make sure you qualify. Click HERE to download IRS Form 5405.

Need the tax credit right away?
Contact your CPA. If you purchase your primary home between January 1st and November 30th 2009, you can file an amended 2008 tax return, still use your 2009 tax return, and get your refund faster than if you waited until April 2010.

If you move within 3 years?
You’ll have to repay the entire credit.

If your adjusted gross income is less than $75,000?
You’ll qualify for the full $8,000 credit.

There’s a time limit.
You have to close no your purchase by November 30, 2009. If you’re building your home, you have to occupy your new primary residence by November 30, 2009.

For more information and a specific description of how to actually obtain the tax credit, please listen to this recent edition of the PERL Mortgage Podcast.

Mortgage advisor Ben Glazer explains how borrowers can apply financial gifts towards the down payment of a new home. Special thanks to tax guru Marc Heller (Partner and Director of Technical Tax at Warady and Davis).

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TaxSmart is a Mortgage Credit Certificate (MCC) program providing a federal income tax credit to qualified home buyers. Under the program, a buyer would receive an MCC to reduce income taxes by an amount equal to 20% of the interest paid on a mortgage.

Federal law requires that a home buyer satisfy each of the following guidelines:

First-Time Homebuyer or Target Area Purchase
First-time homebuyers are eligible. Non first-time home buyers are eligible if the subject property is located in a designated target area.

Income
Because the program is intended to benefit low- and moderate-income households, federal law imposes maximum limits on the annual gross income of home buyers.

Purchase Price
Federal law imposes limits on the purchase price of homes financed under the program.

Principal Residence
The buyer must occupy the home as a principal residence within a reasonable period which, under most circumstances, may not exceed 60 days after financing is provided.

One-to-Four-Family Home
Each residence financed must contain 1-4 units. A one-family residence includes a detached home, one unit of a duplex, a townhouse or a condominium unit.

New Mortgage
The mortgage loan financed in connection with a credit certificate is required to be a new mortgage and may not replace a prior mortgage on the home (whether or not previously repaid).

Program Area
In order to be eligible for a certificate, the home financed under the program must be located in the City of Chicago.

MCC’s will be issued to eligible home buyers on a first-come, first-served basis. The certificates are available in connection with any type of mortgage loan (except loans from tax-exempt bond programs), including fixed rate and adjustable rate mortgages.

Please Note: First-time homebuyers must receive pre-purchase counseling to be eligible and must provide a Certificate of Completion with their applications. Purchase Price limits are adjusted periodically.

Income Limits
1 person household
$60,320 (Non-Target Area)
$72,384 (Target Area)

2 person household
$75,400 (Non-Target Area)
$90,480 (Target Area)

3+ person household
$86,710 (Non-Target Area)
$105,560 (Target Area)

Purchase Price Limits
1 Unit Non-Target
$325,894 (Existing)
$325,894 (New Construction)

1 Unit Target
$398,315 (Existing)
$398,315 (New Construction)

2 Unit Non-Target
$367,060 (Existing)
Not eligible (New Construction)

2 Unit Target
$448,629 (Existing)
$448,629 (New Construction)

3 Unit Non-Target
$445,960 (Existing)
Not eligible (New Construction)

3 Unit Target
$545,063 (Existing)
Not eligible (New Construction)

4 Unit Non-Target
$514,570 (Existing)
Not eligible (New Construction)

4 Unit Target
$628,919 (Existing)
Not eligible (New Construction)