2010 Tax Form 1040: Home-related tax savings

The 2010 Form 1040 reflects a number of new tax breaks we want you to be aware of so you can take full advantage of them.  Today’s post addresses changes to the tax laws regarding home-related tax savings.

New to 2010 is the personal casualty and theft loss limit reduction. Each personal casualty or theft loss is limited to the excess of the loss over $100 (instead of the $500 limit that applied for 2009). This yields larger deductions and thus greater tax savings for affected individuals.

Another change regards corrosive drywall damage. A taxpayer who paid for repairs to his personal residence or household appliances because of corrosive drywall that was installed between 2001 and 2008 may be able to deduct those amounts as casualty losses under a special safe harbor crafted by the IRS.

Finally, an eligible first-time homebuyer (and a long-term resident treated as a first-time homebuyer) may be able to claim a first-time homebuyer credit for a home that was purchased in 2010. To qualify, the home must have cost $800,000 or less. You generally cannot claim the credit for a home you bought after April 30, 2010. However, you may be able to claim the credit if you entered into a written binding contract before May 1, 2010, to buy the home before July 1, 2010, and actually bought the home before October 1, 2010.

If you have any questions about how these tax benefits may apply to you, or tax planning in general, please contact out office.

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