More Extended Tx Credit Info

• The new law as explained by the IRS:
  Authorizes the credit for long-time homeowners buying a replacement principal residence.
• Raises the income limitations for homeowners claiming the credit.
• Members of the military, Foreign Service and intelligence community serving outside the U.S. should also be aware of new benefits in the law that apply particularly to them.
• A new version of Form 5405, First-Time Homebuyer Credit, will be available in the next few weeks.
• A taxpayer who purchases a home after Nov. 6 must use this new version of the form to claim the credit. Likewise, taxpayers claiming the credit on their 2009 returns, no matter when the house was purchased, must also use the new version of Form 5405. Taxpayers who claim the credit on their 2009 tax return will not be able to file electronically but instead will need to file a paper return.
• A taxpayer who purchased a home on or before Nov. 6 and chooses to claim the credit on an original or amended 2008 return may continue to use the current version of Form 5405.
  Income Limits Rise
  The new law raises the income limits for people who purchase homes after Nov. 6. The full credit will be available to taxpayers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers. Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.
• Homes purchased prior to Nov. 7, 2009, existing MAGI limits remain in place. The full credit is available to taxpayers with MAGI up to $75,000, or $150,000 for joint filers. Those with MAGI between $75,000 and $95,000, or $150,000 and $170,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.
  New Requirements
  Several new restrictions on purchases that occur after Nov. 6 go into effect with the new law:
  • Dependents are not eligible to claim the credit.
  • No credit is available if the purchase price of a home is more than $800,000.
  • A purchaser must be at least 18 years of age on the date of purchase.
  For Members of the Military
  Members of the Armed Forces and certain federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and still qualify for the credit. An eligible taxpayer must buy or enter into a binding contract to buy a home by April 30, 2011, and settle on the purchase by June 30, 2011.
  For more details on the credit, visit the First-Time Homebuyer Credit page on IRS.gov.
  

The New Tax Credit Basics

By now we have all heard that in an effort to stimulate the U.S. housing market as well as address the economic challenges facing our nation, Congress has passed new legislation that:

· Extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010. AND, here’s the new part:
· Expands the credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010.

I have been asked a lot of questions about how it really works, so will address these some of these questions here as well as in following blogs this week. Here are some of the basics:

So Who Qualifies?
· First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.
To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.
· Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.

What Property Types Qualify?
Primary residences only! These may include: single family homes, townhomes, condos and co-ops.

Will it have to be Paid Back?
No, if you plan to live in the home for a minimum of 3 years. Should you decide to sell it within those 3 years the credit will be recouped with the sale.

Next I will cover the amount available, income and income limits and begin to answer more indepth questions.