Updated
Nov. 17, 2009,
to add more
information on
the new
legislation
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.
- Several
new
restrictions
apply to
homes
purchased
after Nov.
6, 2009.
- Purchasers
must attach
a properly
executed
settlement
statement to
their
return.
- No credit
is available
if the
purchase
price of the
home exceeds
$800,000.
- The
purchaser
must be at
least 18
years old on
the date of
purchase.
For a
married
couple, only
one spouse
must meet
this age
requirement.
- A
dependent is
not eligible
for the
credit.
- The new
law gives
the IRS
broader
authority to
deny
first-time
homebuyer
credit
claims,
without
having to
first audit
a taxpayer’s
return.
Known as
math error
authority,
this
authority
applies,
retroactively,
to credits
claimed on
original and
amended 2008
returns, as
well as to
claims yet
to be filed.
-
Additionally,
there are
new benefits
for members
of the
military and
certain
other
federal
employees:
- Members of
the
uniformed
services,
members of
the Foreign
Service and
employees of
the
intelligence
community
serving
outside the
U.S. have an
extra year
to buy a
principal
residence in
the U.S. and
qualify for
the credit.
- In many
cases, the
credit
repayment
(recapture)
requirement
is waived
for members
of the
uniformed
services,
members of
the Foreign
Service and
employees of
the
intelligence
community.
More
information on
these new
benefits for
the military,
Foreign
Service and
intelligence
community
serving
outside the
U.S. is
available.
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.
For 2008 Home
Purchases
The Housing
and Economic
Recovery Act
of 2008
established a
tax credit for
first-time
homebuyers
that can be
worth up to
$7,500. For
homes
purchased in
2008, the
credit is
similar to a
no-interest
loan and
must be repaid
in 15 equal,
annual
installments
beginning with
the 2010
income tax
year.
For 2009 Home
Purchases
The American
Recovery and
Reinvestment
Act of 2009
expanded the
first-time
homebuyer
credit by increasing
the credit
amount to
$8,000 for
purchases made
in 2009 before
Dec. 1.
However, the
new Worker,
Homeownership
and Business
Assistance Act
of 2009 has
extended the
deadline. Now,
taxpayers who
have a binding
contract to
purchase a
home before
May 1, 2010,
are eligible
for the
credit. Buyers
must close on
the home
before July 1,
2010. [Added
Nov. 12, 2009]
For home
purchased in
2009, the
credit does
not have to be
paid back
unless the
home ceases to
be the
taxpayer's
main residence
within a
three-year
period following
the purchase.
First-time
homebuyers who
purchase a
home in 2009
can claim the
credit on
either a 2008
tax return,
due April 15,
2009, or a
2009 tax
return, due
April 15,
2010. The
credit may not
be claimed
before the
closing date.
But, if the
closing occurs
after April
15, 2009, a
taxpayer can
still claim it
on a 2008 tax
return by
requesting an
extension of
time to file
or by filing
an amended
return.
