Archive for the ‘First-Time Homebuyer Tax Credit’ Category

First-Time Homebuyer Tax Credit Extended

Monday, November 9th, 2009

For the past couple of months, there has been speculation on whether Congress would extend the First-Time Homebuyer Tax Credit which was due to expire on November 30th (see our blog from October 5th).

In a 403-12 vote, the House approved the Worker, Homeownership and Business Assistance Act of 2009 – a $24 billion economic stimulus bill which extends unemployment benefits to the longtime jobless and extends and expands the homebuyer tax credit.  The Senate passed the legislation 98-0 and President Obama signed the bill into law on Friday, November 6th.

Since January, first-time homebuyers have been getting tax credits of up to $8,000 (10 percent on principal homes valued up to $800,000).  This includes buyers who haven’t owned a home in three years.  Not only does the credit amount remain the same for these first-time homebuyers, the program now includes a $6,500 credit for existing homeowners who buy a new home after living in their residence for at least five years.

The November 30, 2009 deadline has also been extended and both groups now have until April 30, 2010 to sign a purchase agreement and until June 30, 2010 to close.

According to the National Association of Realtors, about 1.8 million first-time homebuyers will have qualified for the credit by the end of November.  Of that number, they estimate that at least 350,000 of them would not have purchased their homes without the credit.

The expansion of this credit also allows for more generous income limits.  Phase out begins for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.  That’s up from $75,000 for individuals and $150,000 for joint filers.

Two other points are addressed in the Worker, Homeownership and Business Assistance Act of 2009 – unemploment benefits are extended by another 14-20 weeks and all money-losing companies can now use current losses to offset taxable profits in the previous five years (giving them refunds of taxes paid in those years).

For full details on this legislation and for access to the applicable IRS forms, click onto www.irs.gov.

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Deadline is Nearing for the First-Time Homebuyer Tax Credit

Monday, October 5th, 2009

Even though the First-Time Homebuyer Tax Credit deadline is November 30th, the real deadline is upon us. That’s because the November 30th deadline refers to the closing date. Since most home purchases take between 45 to 60 days between contract signing and the closing date, you need to start house hunting in earnest in order to take advantage of this tax credit.

Qualifying taxpayers who buy a home by November 30th can get up to $8,000, or $4,000 if married filing separately.  Even better news — this credit does not have to be repaid as long as the home remains the main residence for 36 months after the purchase date.

Taxpayers can claim 10 percent of the purchase price up to $8,000, but the credit amount starts to phase out for taxpayers whose modified adjusted gross income (MAGI) is more than $75,000 ($150,000 filing jointly).  If you do qualify for this tax credit, think about how you want to use it.  You can use it towards a nice tax refund - or - use the benefit of the tax credit to make a Roth IRA conversion if eligible.

Technically, you don’t have to actually be a first-time homebuyer to qualify for this credit.  If you did not own any other main home during the three-year period ending on the date of purchase, you will be considered a first-time homebuyer.

One side note for those who purchased homes between April 8, 2008 and December 31, 2008 - you do not qualify for this tax credit, but you may qualify for a different tax credit which amounts to 10 percent of the purchase price up to $7,500 ($3,750 for married individuals filing separately).  The big difference is that this tax credit must be repaid in 15 equal installments over 15 years beginning with the 2010 tax year.

With the success of the First-Time Homebuyer Tax Credit program - over 1.4 million homebuyers have used this credit so far - there is talk of extending the November 30th deadline.  However, Congress has yet to make a decision on an extension.  In the meantime, good luck house hunting!  If you would like more details on this tax credit and to see if you qualify, visit www.irs.gov.

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