As you have probably heard, Congress passed a new act that extends emergency unemployment compensation during these difficult economic times. Included in that bill was the extension of the First Time Homebuyer Credit which was scheduled to end December 1st of 2009. Not only has the credit has been extended but it has also been expanded to include a whole new group of potential homebuyers.
First Time Home Buyers – This credit of 10% of the purchase price of the home or a maximum of $8,000 will remain available on purchases contracted by April 30, 2010 and closed no later than June 30, 2010. A first time home buyer is defined as someone who has not had ownership in a personal residence during the 3-year period prior to the purchase of the home.
A new provision has been added to include individuals considered Long-time Residents of the Same Personal Residence. This provision includes homeowners who have used and owned the same home as principal residence for 5 consecutive years of an 8-year period. When these individuals purchase a new home after November 6, 2009, they may be eligible for a 10% tax credit not to exceed $6,500.
The following restrictions apply to both types of credits:
- A phase out for individuals with adjusted gross incomes of $125,000 to $145,000 for single filers and $225,000 to $245,000 for married couples filing a joint return.
· The purchase price of the home cannot exceed $800,000 or there is no credit of any amount.
· The credit is not available for buyers under age 18 or buyers who can be claimed as a dependent of another. There are also additional restrictions on purchases of homes from family members.
For extended duty military, Foreign Service workers and intelligence community workers who are serving outside the United States for at least 90 days, the credits have been extended by one year to April 30, 2011.
To claim either of these credits, the taxpayer must include a copy of the settlement statement when filing their return.
For tax planning purposes, keep in mind that the price of the home must not exceed $800,000 or the credit is lost completely. Even a purchase price of $800,500 will eliminate the credit while a purchase price of $799,500 will qualify.
The phase out amounts have been increased for this new time period which covers purchases between November 7, 2009 and April 30, 2010. If you fall within the phase out ranges listed above, you can still receive a partial credit. If your income exceeds those limits, no credit is available.
No payback is required for credits unless the house ceases to be a personal residence within 36 months. In other words, if you don’t intend to use the home for at least three years, be prepared to repay the full amount.
If you have any additional questions regarding additional specifics of the Home Buyer Credits, please do not hesitate to call or email our office.
Source: Courtsey of Robertson, Woodford & Summers, LLP
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