November 6th, 2009: The Homeownership and Business Assistance Act of 2009 signed into law. This extends and expands the first-time homeowner tax credit allowed by previous Acts. Here is how the law benefits both first time home buyers and former homeowners who hope to buy a home.
First time buyers receive a tax credit up to $8,000.00 or 10% of the purchase price - the lesser of which. Homeowners who have owned and lived in a residence consecutively for five of the last eight years now qualify for a tax credit up to $6,500.00 or 10% of the purchase price - the lesser of which. Both tax credits apply to sales under binding contract written between November 6, 2009 and April 30, 2010. The sale must close no later than June 30, 2010.
The before mentioned dates have been extended for Members of the Armed Forces, Foreign Service and Intelligence Community; applies to sales with a binding sales contract in place on or before April 30, 2011, which must close by June 30, 2011.
The new income limits are higher also. Single filers can earn up $125,000.00, while Married filers can earn $225,000. A partial tax credit will apply if these income limits are exceeded by no more than $20,000.00.
Eligible properties include single family homes, townhomes, condominiums, mobile homes, modular homes, even house boats and new construction. For 2-4 units owner-occupied properties qualify, but only the portion of the value that is occupied by the owner. The maximum value of the purchased property can’t exceed $800,000.00
Ineligible home buyers: non-resident aliens, buyer who purchase from a family member and buyers who have sold their property before the end of the tax year.
$8,000 First-time Home Buyer Tax Credit at a Glance
· The $8,000 tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
· The tax credit does not have to be repaid unless the home is sold or ceases to be used as the buyer’s principal residence within three years after the initial purchase.
· The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
· The tax credit applies only to homes priced at $800,000 or less.
· The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.
· For homes purchased on or after January 1, 2009 and on or before November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly.
· For homes purchased after November 6, 2009 and on or before April 30, 2010, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.
The $6,500 Move-Up / Repeat Home Buyer Tax Credit at a Glance
· To be eligible to claim the tax credit, buyers must have owned and lived in their previous home for five consecutive years out of the last eight years.
· The tax credit does not have to be repaid unless the home is sold or ceases to be used as the buyer’s principal residence within three years after the initial purchase.
· The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500.
· The tax credit applies only to homes priced at $800,000 or less.
· The credit is available for homes purchased after November 6, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, the home purchase qualifies provided it is completed by June 30, 2010.
· Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.
Special Rules for Members of the Military, the Foreign Service
and the Intelligence Community
Congress has acknowledged the unique circumstances affecting members of the military, the foreign service and the intelligence community by making the following exceptions that apply to both the $8,000 tax credit for first-time home buyers and the $6,500 tax credit for repeat home buyers.
Exemption From Tax Credit Recapture Rules
· Typically, homes that are sold or that cease to be used as a principal residence within three years of the initial purchase are subject to recapture of the tax credit.
· However, qualified service members who sell or move from a tax credit home within three years of the initial purchase due to official extended duty are exempt from the recapture rule.
Extension of Tax Credit Deadlines
· The home buyer tax credit is available for qualified purchases with a binding sales contract in place on or before April 30, 2010 and closed by June 30, 2010.
· However, for qualified service members who are ordered on a period of official extended duty, these dates are extended for one year. For these home buyers, the tax credit applies to sales with a binding sales contract in place on or before April 30, 2011 and closed by June 30, 2011.
Definitions
· “Qualified service member” means a member of the uniformed services of the U.S military, a member of the Foreign Service of the U.S., or an employee of the intelligence community.
· “Official extended duty” means any period of extended duty while serving at least 50 miles away from home for a period in excess of 90 days.
For more information about the extended tax credit give me a call and/or visit the following website: www.federalhousingtaxcredit.com or call or text Chip if you have questions: 253.617.9671.