Thursday, February 11, 2010

Homebuyer tax credit Extension to Wider Range of Buyers has New Requirements & Restrictions

Changes to US homebuyer tax credit were made on November 6,2009, at the Worker, Home ownership, and Business Assistance Act of 2009.

This law extended the homebuyer tax credit to a broader range of home purchasers and added new documentation requirements to deter fraud and ensure taxpayers properly claim the credit. 

First-time home buyer tax credit for $8,000 (or $4,000 if married and filing separately) maximum was extended to April 30, 2010. 
 
Also available is homebuyer tax credit of $6,500 ($3,250 if married and filing separately) maximum for current homeowners who had used the home sold or being sold as a principal residence consecutively for five of the previous eight years. 
 
For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns. 

A new version of IRS Form 5405 , First-Time Homebuyer Credit, is available (revised December 2009).  A taxpayer who purchases a home after Nov. 6, 2009 must use this new version of the form to claim the credit.

There is a "binding contract" provision which, in essence, states that so long as a written binding contract to purchase is in effect on April 30, 2010, the buyer has until July 1, 2010 to close escrow.

In addition, the law increased the income limits in order for the buyer to be eligible for the tax credit.  The increased modified adjusted gross income (MAGI) limits are effective as of November 7, 2009:  $125,000 for a single person, $225,000 for a married couple.  For homes purchased prior to Nov. 7, 2009, existing MAGI limits remain in place. The full credit is available to taxpayers with MAGI up to $75,000 ($150,000 for joint filers). Those with MAGI between $75,000 and $95,000 (or $150,000 and $170,000 for joint filers) are eligible for a reduced credit. Those with higher incomes do not qualify.

The law includes anti-fraud provisions that require the purchaser to attach certain documentation to the tax return.  The new documentation requirements mean that taxpayers claiming the credit cannot file electronically and must file paper returns.

Other restrictions:

  • Dependents are not eligible to claim the tax credit.
  • No credit is available if the purchase price of a home is more than $800,000.
  • A purchaser must be at least 18 years of age on the date of purchase.
________________

Harrison K. Long, Realtor & broker, Explore Group, Coldwell Banker Previews, Irvine, CA.  CA DRE #01410855.  ExploreProperties@gmail.com.  Lawyer member of the California State Bar Association - State Bar number 69137.  Helping People with their Best Decisions About Real Estate at Orange County, California.

 

Posted via email from Explore OC Homes

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