All the Info on the Tax Credit for New Buyers and Repeat Buyers

American Recovery and Reinvestment Act of 2009:

The first extension and expansion of the tax credit was introduced with the American Recovery and Reinvestment Act of 2009. This law changed the time period to purchase the principal residence, the amount of the credit, repayment terms, and the tax year for claiming the credit.

Taxpayers who purchased a home between January 1, 2009 and November 30, 2009 can still claim a credit of 10% of the purchase price but up to a maximum of $8,000 ($4,000 for married filing separately). A home constructed by the taxpayer only qualifies for the credit if the taxpayer occupies it no later than November 30, 2009. The credit is not required to be paid back so repayment terms are not applicable. However, the home must remain the taxpayer’s principal residence for at least 36 months after the date of purchase. Taxpayers who qualify for the 2009 credit have the option to claim the credit on either their 2008 or 2009 tax return. If a 2008 return had already been filed, an amended return can be submitted.

Worker, Homeowner and Business Assistance Act of 2009:

The final extension and expansion, as it stands today, was introduced with the Worker, Homeowner and Business Assistance Act of 2009. This law changed the deadline to purchase and close on a home, authorized the credit for long-time homeowners buying a replacement principal residence, raised the income limitations for claiming the credit, and again the tax year for claiming the credit.

Under this version 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. Long-time residents, those that do not qualify as first-time buyers, are allowed a credit of up to $6,500 if they owned and used the same 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 principal residence. Individuals with income up to $124,999 received the full credit, the credit was phased out for individuals with income between $125,000 and $145,000, and individuals with income in excess of $145,000 do not qualify for any part of the credit. Joint filers with income up to $224,999 received the full credit, the credit was phased out for joint filers with income between $225,000 and $245,000, and joint filers with income in excess of $245,000 did not qualify for any part of the credit. For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax return.

Under this new law several restrictions go into effect for purchases after November 6, 2009. Dependents are not eligible to claim the credit, no credit is available if the purchase price of the home is over $800,000, a purchaser must be at least 18 years of age on the date of purchase.

This article was written by Salvatore M. Grasso, CPA of Grasso & Company, LLC. It is not comprehensive and not intended to constitute legal or tax advice but only to inform the reader. The application of tax laws may vary amongst taxpayers. Accordingly, a qualified professional should be consulted with in the application of these rules to ensure they are applied properly.