The Worker, Homeowner?ship and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence.
The tax credit now applies to sales occurring on or after Jan. 1, 2009, and on or before April 30, 2010. But in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010, will qualify.
For sales occurring after Nov. 6, 2009, the Act establishes income limits of $125,000 for single taxpayers and $225,000 for married couples filing joint returns.
The following questions and answers provide basic information about the tax credit. If you have more specific questions, consult a qualified tax adviser or legal professional about your unique situation.
n Who is eligible to claim the $8,000 tax credit?
First-time home buyers purchasing any kind of home?new or resale?are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur before April 30, 2010.
For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner. A limited exception exists for certain contract for deed purchases and installment sale purchases. See the IRS site for more details.
But the law also allows home sales occurring by June 30, 2010, to qualify, provided they are due to a binding sales contract in force on or before April 30, 2010.
Persons who are claimed as dependents by other taxpayers or who are under age 18 are not qualified for the tax credit program.
n What is the definition of a first-time home buyer?
The law defines ?first-time home buyer? as a buyer who has not owned a principal residence during the three-year period prior to the purchase.
For married taxpayers, the law tests the homeownership history of both the home buyer and his or her spouse.
For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit.
But IRS Notice 2009-12 allows unmarried joint purchasers to allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter.
Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
n How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home?s purchase price up to a maximum of $8,000.
n Are there any income limits for claiming the tax credit?
Yes. For sales occuring after Nov. 6, 2009, the income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return.
The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $125,000 for single taxpayers and $225,000 for married taxpayers filing a joint return.
The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.