New Legislation

New legislation, the Worker, Homeownership and Business Assistance Act of 2009, which was signed into law on Nov. 6, 2009, extends and expands the first-time homebuyer credit allowed by previous Acts. The new law:

• Extends deadlines for purchasing and closing on a home.
• Authorizes the credit for long-time homeowners buying a replacement principal residence.
• Raises the income limitations for homeowners claiming the 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 (up to $3,250 for a married individual filing separately). They 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.

People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after Nov. 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 of $75,000 to $95,000 or $150,000 to $170,000 for joint filers still apply to purchases on or before Nov. 6, 2009.

General Information

Homebuyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the first-time homebuyer credit. The credit:

• Applies only to homes used as a taxpayer's principal residence.
• Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.
• 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.

The credit is claimed using Form 5405, which you file with your original or amended tax return.

FirstTimeTaxCreditFlyer.pdf

      First Time Homebuyer Tax Credit

• The 2009 Economic Stimulus Bill, signed into law on February 17th, includes a tax credit for first time homebuyers. All qualifying homebuyers are entitled to take advantage of this one-time tax credit.

• Up to $8,000 tax credit. The tax credit is equal to the lesser of $8,000 or 10% of the purchase price of the home for first time homebuyers who purchase a home after January 1, 2009 and before December 1, 2009.

This replaces a previous $7,500 tax credit that was scheduled to expire on

July 1, 2009.

• Income requirements. Single taxpayers with incomes up to $75,000

        and married couples with incomes up to $150,000 can qualify for the

        full tax credit.

• First time buyers. Individuals who have not owned a home in the past three years are considered first time buyers.

• Residency requirements. For homes purchased after January 1, 2009, this tax credit does not need to be repaid if the home is occupied as the buyer’s personal residence for the first three years from the date of purchase.

Prior to this new legislation the former $7,500 tax credit was required to be recaptured over a period of 15 years or when the home was sold.

• Tax returns. A provision permits taxpayers to claim the tax credit

        for homes purchased during 2009 on their 2008 tax return.