As of September 2009 the first-time homebuyer credit had provided tax benefits of approximately $1.4 Million to American families. Now, new legislation, that was signed into law on November 6, 2009, extends and expands the first-time homebuyer credit!
Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.
For the first time, long-time homeowners who buy a replacement principal residence may also claim a homebuyer credit of up to $6,500. These taxpayer must have lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the replacement home is purchased.
There are still income limitations; however they have been extended to include more taxpayers with higher income. The new law raises the income limits for homes purchased after November 6, 2009. The credit phases out for individual taxpayers with modified adjusted gross income (MAGI) between $125,000 and $145,000 or between $225,000 and $245,000 for joint filers. The existing MAGI phase-outs discussed here still apply to purchases on or before November 6, 2009.
The credit applies only to homes used as a taxpayer’s principal residence and is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.
For a comprehensive Questions and Answers on this issue, provided by the IRS, click here.
If you would like more details about this or any other aspect of the Worker, Homeownership and Business Assistance Act of 2009, please call our offices and ask to speak to one of our shareholders or email us at info@taxwarriors.com.