Tax Credit for First-Time and Repeat Homebuyers

The Worker, Homeownership and Business Assistance Act of 2009, signed into law on Nov. 6, 2009, extends the first-time homebuyer tax credit and expands the credit to repeat home buyers and here’s what you need to know.

The new law states that “an eligible taxpayer must purchase, or enter into a binding contract to purchase, a principal residence and close escrow on or before April 30, 2010.” However, the tax credit will qualify if a binding purchase contract is signed by April 30, 2010 and escrow closes by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax return. If the home was purchased between January 1, 2009 and November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing joint tax returns. If the home was purchased between November 7, 2009 and April 30, 2010, the income limits are $125,000 for single taxpayers and $225,000 for married couples filing joint tax returns (an increase of $50,000 for single taxpayers and $75,000 for married couples).

The tax credit for first-time home buyers (the IRS defines a first-time home buyer as someone who has not owned a principal residence the past three years prior to the purchase) is equal to 10 percent of the purchase price (up to a maximum of $8,000 as the tax credit applies only to homes priced at $800,000 or less). The tax credit doesn’t have to be repaid unless the home is sold or no longer used as the buyer’s principle residence within three years after the purchase.

The credit is also valid for current homeowners buying a replacement principal residence. Eligibility to claim the tax credit states that the buyers must have owned and lived in their previous home for five consecutive years out of the previous eight years. The tax credit is equal to 10 percent of the purchase price (up to a maximum of $6,500 and the tax credit applies only to homes priced at $800,000 or less). The credit is available if the home was purchased between November 7, 2009 and April 30, 2010. However, the tax credit will qualify if a binding purchase contract is signed by April 30, 2010 and escrow closes by June 30, 2010. The income limits are $125,000 for single taxpayers and $225,000 for married couples filing joint tax returns. The tax credit doesn’t have to be repaid unless the home is sold or no longer used as the buyer’s principle residence within three years after the purchase.
If you haven’t yet explored how the tax credit and the current rate environment might benefit you or someone you know, let’s arrange a time to discuss your unique situation as well as your short- and long-term goals. Remember, rates are still very good, but they may not be for long.

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Carol Peterson
Home Loan Consultant
100 E Street, #201
Santa Rosa, CA 95404
Cell: (707) 290-5167
Toll Free: (866) 627-4701
carol@petersonlending.com
www.carolpeterson4loans.com

First -Time Homebuyer Changes

A first-time homebuyer credit applies to individuals who purchase a home on or after April 9. 2008 and before April 30, 2010.  However, if the buyer has the home under contract by April 30, 2010 they have until June 30, 2010 to close and still qualify for the credit.

The adjusted gross income cap of the credit has been increased as well.  It is now $125,000 for single taxpayers, and $225,000 for married filing jointly.

Long-Time Homeowners
Who Qualifies?

This credit applies to all existing homeowners who purchase a replacement principal residence and have lived in the same principle residence for any five-consecutive year period with in an eight-year period that ends on the date the replacement home is purchased.  For these homeowners, there is a credit equal to 10% of the purchase price, capped at $6,500.  The same caps for adjusted gross income existing in the first-time homebuyer credit also apply to this credit.  This legislation was signed into law on November 6, 2009.  Therefore, only homes bought after this date and before April 30, 2010 qualify.  If a home is under contract by this date, the purchaser has until June 30, 2010 to close and still qualify for the credit.  Any home purchase exceeding $800,000 will be excluded for the credit.

When can the credit be claimed?

the credit is taken in the year the taxpayer purchases the home.  The date of purchase is the date title closes.  However, a taxpayer purchasing the home in 2009 may elect to claim the credit on their 2008 tax return instead of waiting to file it on their 2009 tax return.  An amended return may be filed to claim the credit for 2008.  This rule will also apply for homes bought in 2010.  You may file the credit on your 2009 return or wait until filing your 2010 return to claim the credit.

New Filing Requirements for Both Credits.

Due to fraudulent credit reporting, the IRS has issued new guidelines for reporting the credit.  The following items must be sent with the return when the credit is being filed: a copy of the closing statement (including signatures of all parties, names of seller and buyer, property address and purchase price), a copy of taxpayer’s most recent mortgage statement, and verification that the property is a name and address required:  driver’s license, pay statement received in past 2 months, bank statement received in past two months, or current auto registration.  If the home is newly constructed, and occupancypermit must be submitted for that property.