RISMEDIA: Obama Signs Homebuyer Tax Credit Extension
I’m sure by now many of you have read that President Barack Obama has signed a law that extends and expands the first-time homebuyer tax credit.
Unlike the former tax credit, the new law provides a deadline for a binding purchase contract; not a closing date deadline. Structuring the law in this manner provides easy-to-follow guidance to the general public regarding what needs to be accomplished and when. The former law was somewhat confusing because it required real estate professionals to back-into the binding purchase contract deadline to ensure deals closed in time to take advantage of the tax credit.
FIRST-TIME HOMEBUYER TAX CREDIT EXTENDED
The new law recently signed by President Obama automatically and immediately extended the deadline from the original November 30, 2009 deadline to June 30, 2010 (if and only if a purchase contract is binding on or before April 30, 2010.). Therefore, a note to you prospective buyers, your target date for having an accepted purchase contract is April 30, 2010.
For the sake of this tax credit, a first-time homebuyer is defined as a buyer who has not owned a principal residence during the three-year period ending on the date of purchase. Therefore, if you have previously owned a principal residence prior to the start of this three-year grace period, you would still qualify for the first-time homebuyer tax credit.
The new law only extended the former law’s deadline. The amount of the first-time homebuyer credit is still limited to $8,000.
REPEAT BUYERS ARE NOW INCLUDED
The new law has also been expanded to provide financial assistance to existing homeowners who purchase another primary residence.
For the sake of this tax credit, an existing homeowner is defined as a buyer who has lived in their current home as a primary residence for a period of five consecutive years during the past eight years ending on the date of the new home purchase. The new home must also be used as their primary residence.
The amount of the existing homeowner credit is limited to $6,500.
OTHER TERMS AFFECTING THESE TWO CREDITS
U.S. Income-Tax Paying Individuals
The first-time homebuyer and existing homeowner credits are available to all United States citizens who file their annual income taxes.
Individual Income Limits
The amount of the credit you can claim for these credits are determined by your filing status and the amount of your computed Modified Adjusted Gross Income (MAGI).
Single or Head-Of-Household Filers: The full amount of the credit is available as long as your MAGI is at most $125,000. The credit is completely phased out with an MAGI of at least $145,000.
Married Filing Joint Filers: The full amount of the credit is available as long as your combined MAGI is at most $225,000. The credit is completely phased out with a combined MAGI of at least $245,000.
Property Type & Purchase Price Limits
Any home that is purchased with the intent of owner-occupying as a primary residence qualifies for the first-time homebuyer and existing homeowner credits. The purchase price for both credits is limited to $800,000. By definition, vacation homes and rental properties will not be treated as a primary residence and thus are not eligible for either credit.
Refundable Tax Credit & No Payback
Both the first-time homebuyer and the existing homeowner credits are refundable credits. Therefore, regardless of your tax liability, the amount of the credit that you can claim will reduce your liability. If you are expecting a refund before computing these credits, this will increase the amount of your refund.
These credits are also true credits. Unlike the 2008 version of the first-time homebuyer tax credit that requires homebuyers to repay their tax credits over a fifteen-year period, the new law extends the 2009 version that does not require repayment (general rule). There is one exception to the general rule: The homeowner must pay back their credit if and only if he or she sells the home or stops using the home as his or her primary residence during the three year period starting on the date of the new home purchase.
All qualified homebuyers can apply for the tax credit on either their 2009 or 2010 income tax returns.
Please contact me if you have any additional questions regarding the newly-extended first-time homebuyer credit or the newly-created existing homeowner credit.
The writers for RISMEDIA provide more details on the new homebuyer credits. Click here to read more about these credits>>>
----Labels: Economy, Real Estate
I’m sure by now many of you have read that President Barack Obama has signed a law that extends and expands the first-time homebuyer tax credit.
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