The law extending the first-time homebuyer tax credit, and adding a “long-time resident” credit, went into effect on Nov. 6 of 2009. So, what are the parameters of the extension and the addition?
The first-time homebuyer tax credit, a.k.a. the “Worker, Homeownership and Business Assistance Act of 2009”, extends the time for qualifying for the credit from the previous date of Nov. 30, 2009 to April 30, 2010. In addition to this, as long as the Buyer has entered into a binding contract by April 30, 2010, they can have until June 30, 2010 to actually close the deal. The credit for first-time homebuyers remains the same amount as it was previously, $8,000. In order to qualify as a “first-time homebuyer” you must have not owned a primary residence for the three years leading up to the date of closing.
The addition to the first-time homebuyer portion, the law added a “long-time resident” credit. People who will qualify for this credit are those who have owned and used a home as a principal or primary residence for “at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence.” This credit is for an amount of $6,500.
Individuals with qualifying purchases that occur in 2010 can choose to claim the credit on either their 2009 or 2010 tax returns. There will be a new version of the form required in order to claim the credit (Form 5405, First-Time Homebuyer Credit). This form was created for all qualifying purchases that occur after Nov. 6, 2009. If the Buyers want to claim the credit on their 2009 tax return, they will need to file a paper return; they cannot file electronically.
What other changes were made to this law?
Raised Income Limit
Modified Adjusted Gross Income (“MAGI”) levels were also raised for purchasers who close after Nov. 7, 2009. The original law gave full credit to taxpayers with MAGI up to $75,000 (or $150,000 for joint filers), and individuals with MAGI between $75,000 – $95,000 (or $150,000 to $170,000 for joint filers) could potentially receive a reduced credit. The new law raises the MAGI to $125,000 (or $225,000 for joint filers); individuals with MAGI from $125,000 – $145,000 (or joint filers with MAGI from $225,000 – $245,000) will be eligible for a lesser credit. Individuals with income levels above these amounts will not be eligible for any sort of credit through this law.
New Restrictions & Requirements
Dependents are not eligible to claim either credit.
The purchase price limit is $800,000 – no credit will be available to homes purchased above this amount.
The purchaser of the home must be at least 18 years old.
Members of the armed forces (and some certain federal employees) who are serving their duty outside the US have one year beyond the stated date to buy a principal residence within the US and still receive this credit. These individuals must enter into a buying contract by April 30, 2011 and close by June 30, 2011.
If you, or anyone you know, fits within these parameters, it is a great time to take advantage of the tax credit currently available.