Homebuyer Tax Credit Lives
On November 6th, 2009 The Worker, Homeownership and Business Assistance Act of 2009 was signed into law. The law extends and expands the first-time homebuyer credit allowed by previous Acts. Highlights of the new law include the following:
- Extends deadlines for purchasing and closing on a home.
- Authorizes the credit for long-time homeowners buying a replacement principle residence.
- Raises the income limitations for homeowners claiming the credit.
Under the law, an eligible taxpayer must buy or enter into a binding contract to buy a principal residence on or before April 30, 2010. Closing on the home must take place no later than June 30, 2010. Taxpayers on qualifying purchases made in 2010 have the option of claiming the credit on either their 2009 or 2010 tax return.
Long-time homeowners who purchase a replacement principal residence may also claim a homebuyer credit of up to $6500 for married couples or $3,500 for single filers. The homeowner must have lived in the principle residence for no less then five of the last eight years ending on the date the replacement home is purchased. Another enhancement to the legislation includes higher income limits for homes purchased after Nov. 6. The credit phases out for individual taxpayers with modified adjusted gross income (MAGI) between $125,000 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 purchasers of home on or before Nov. 6.
The maximum purchase price of the home under the new rules is $800,000.
Additional information includes:
- Credits apply only to homes used as a principle residence by the taxpayer.
- The credit will either decrease a taxpayer’s bill or increase their refund dollar for dollar.
- Is fully refundable, and will be paid out to eligible taxpayers even if they owe no tax or the tax credit is more than the tax owned.
The homeowner does not have to pay back the tax credit unless the home ceases to be their primary main residence within a three-year period following the purchase. This means the home cannot become a rental property or a second home during the three-year period.
According to statistics from The National Association of Realtors upwards of 350,000 homes were sold as a result of the homeowners tax credit legislation, and upwards of 500,000 additional home sales are anticipated as a result of the new legislation. With the extension and expansion of the legislation, this continues to be an excellent time to purchase a home.
*Bill Starrels lives in Georgetown and is a senior mortgage loan consultant. He can be reached at 730-625-7355 or [firstname.lastname@example.org] (mailto:email@example.com).