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.
the income limitations for homeowners claiming the credit.
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
- A dependent is not eligible for the credit.
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.
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
- 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.
Homebuyers who purchased a home in 2008, 2009
or 2010 may be able to take advantage of the first-time homebuyer 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.
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.