NEW TAX REGULATION FOR HOME BUYERS
cialis online center;”>New Incentives and Restrictions …
… Where Do You Fit In All This?
Homebuyer Tax Credit Extension Signed into Law
There are some interesting new tax laws that present significant advantages to today’s home buyers. The Worker, Homeownership, and Business Assistance Act of 2009 (Act), was approved by Congress, signed by President Obama, and became law on November 6, 2009. Here’s a summary of the final provisions:
The Act extends and expands the first-time homeowner’s tax credit of $8,000 that was scheduled to expire at the end of November, 2009. Two additional categories of “first time homebuyers” are now entitled to a tax credit if certain conditions are met.
If you are eligible, you must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010, and you must close escrow on the home by June 30, 2010.
The definition of a first-time homebuyer is expanded to include a second group of people. For the $8,000 credit, you are still considered a first-time homebuyer if you haven’t owned a home for the previous three years. The credit is 10% of the purchase price of the home. The full credit will be available for most homes costing $80,000 or more.
A third category of people are now eligible for a reduced tax credit. The new law provides a credit of up to $6,500 ($3,250 for a married individual filing separately) to current homeowners buying a replacement principal residence, as follows: “In the case of an individual (and, if married, such individual’s spouse) who has owned and used the same residence as such individual’s principal residence for any five-consecutive-year period during the eight-year period ending on the date of the purchase of a subsequent principal residence, such individual shall be treated as a first-time homebuyer.”
The previous income limits still apply to purchases on or before November 6, 2009. Previously, there was a phase-out between $75,000 to $95,000 yearly for individual filers, and $150,000 to $170,000 for joint filers. The new law increases the income thresholds. For homes purchased on or after November 7, 2009, the credit phases out for individual taxpayers with modified adjusted gross income between $125,000 and $145,000, or between $225,000 and $245,000 for joint filers.
There is a limit on the purchase price of $800,000. In addition a new age restriction has been added. The buyer or the buyer’s spouse must be at least 18 years old on the date of closing for purchases on or after November 6, 2009.
If the home ceases to be the buyer’s principal residence or if the buyer sells the home or converts it to a business or a rental within three years after the purchase, the credit must be repaid.
To claim the credit, the buyer must file IRS Form 5405 with his or her original or amended tax return, and attach a copy of the purchase closing statement. For qualifying home purchases that close in 2010, the buyer has the option of claiming the credit on the 2010 return or on the 2009 return filed by April 15, 2010.
The first-time homebuyer credit is paid to eligible taxpayers even if they owe no tax or the credit is more than the tax owed.
As always with any tax information, you should consult a qualified tax professional to verify just where you fall in all of this. As you can see, there are things here that have been expanded and some that have become more strict as the laws were changed.
At any rate, there are some areas covered here that do open up significant new tax incentives for some home buyers. That … along with the fact that current home prices are at historic lows … means that now may be a very good time for some reading this to be purchasing a home.
If you’d like to discuss these new regulations as they pertain to you, or if you’re considering a home purchase or sale in the near future, I’d be happy to arrange to contact you personally at your convenience. You can always use the information on the “Contact Me” page of this site … or simply enter your information in the form to your right requesting a Personal Contact, and I’ll be in touch.
Have a GREAT Day!
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