The Worker, Homeownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers and expanded it to cover qualified move-up/repeat home buyers (existing home owners) purchasing a principal residence after November 6, 2009 and on or before April 30, 2010 and home purchase completed by June 30, 2010 will qualify.

Who are Eligible for Tax Credit

• First-time home buyers purchasing any kind of home – new or resale- who are defined by the law as buyers who have not owned a principal residence during the three-year period prior to the purchase are eligible for a tax credit of 10% of the home purchase price, up to a maximum of $8,000.

• Existing home owners who are qualified are those repeat home buyers who have been residing in their principal residence for five consecutive years out of the last eight prior to purchase date. Qualified or move-up buyers are eligible for a tax credit of 10% of the home purchase price, up to a maximum of $6,500.

Income Limits

• Home buyers who file as single or head-of-household taxpayers can claim the full credit. Limits are $8,000 for first-time buyers and $6,500 for repeat buyers.

• The income limit for single tax payer is $125,000 and $225,000 for married taxpayers filing joint returns.

• The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $125,000 for single taxpayers and $225,000 for married couples filing a joint return.

• The credit is not available for single taxpayers whose MAGI is greater than $145,000 and married couples with a MAGI that exceeds $245,000.

Effective Dates

• The eligibility period for the tax credit is for homes purchased after Nov. 6, 2009, and before May 1, 2010. However, home purchases subject to a binding sales contract signed by April 30, 2010, will qualify for the tax credit provided closing occurs prior to July 1, 2010.

Types of Homes that Qualify for the Tax Credit

• All homes that will be used as a principal residence will qualify for the credit, provided the purchase price is less than or equal to $800,000. This includes newly constructed or resale single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats.

• The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences. Tax Credit is Refundable

• The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically, the government will sending a check amounting the portion or even all of the refundable tax credit to the taxpayer.

• An example of which is if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $3,000 for the year, then without the tax credit the taxpayer would owe the IRS $2,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $6,000 ($8,000 minus the $2,000 owed).

• All qualified home buyers can take the tax credit on their 2009 or 2010 income tax return.

 

For more information, go to: www.federalhousingtaxcredit.com.