Thursday, January 14, 2010

First Time Home Buyer Tax Credit: Part 2

Estate Tax reform remains on the agenda. Health care reform and Financial Regulatory reform, as well. What will happen? When will it happen? We don’t know. We can, however, offer one update. The Worker, Homeowner, Business Assistance (WHBA) Act of 2009 was passed on November 6th 2009. A primary purpose of the act was to extend and expand the First Time Home Buyer Tax Credit originally described in last September’s blog post. If you are in the market for a new home - it may be worth your while to accelerate your search.

The WHBA Act extends the First Time Home Buyer Tax Credit to include eligible purchases prior to May 1st 2010. The act also includes some interesting expansions. The act broadens eligibility to higher income levels and includes a reduced credit for certain “long-time residents” purchasing a new home. Here are the rules:

  1. The deadline has been extended to May 1st 2010 - a binding contract must be signed by May 1st. The credit can be used to purchase a new or an existing home - but must be your principal residence.
  2. The Adjusted Gross Income (AGI) phase-out range for eligibility has increased: $125,000 to $145,000 for Single taxpayers and $225,000 to $245,000 for Married Joint taxpayers.
  3. The $8,000 tax credit is claimed on your 2010 tax return. It can, however, be claimed on your 2009 tax return to accelerate the benefit or to ensure AGI qualification.
  4. It remains refundable. If your total tax for the year is zero, you will receive the $8,000 by check. The home must remain your principal residence for three years.
  5. The definition of a first time home buyer continues to be someone who has not owned a principal residence for the past three years.
  6. The Act offers an alternate credit of $6,500 for previously ineligible taxpayers who have: owned and used a house as principal residence for any consecutive five-year period during the eight-year period ending on the closing date for the purchase of the new residence.

Your Realtor should have up to date information. The National Association of Realtors posts a summary on their website .

Please check with your accountant to verify all specifics.

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