First Time Homebuyer - Part 3

Last month I did a quick post about the extension of the First Time Homebuyer's Credit and promised more info. Sorry, it took so long.

The $8000 credit has been extended to April 30, 2010 for the first time buyer but this time all it takes to meet the cut off is a binding contract in place by the April 30th date. The buyers then have 2 months, until June 30th to close. Military and certain federal employees who are serving out of the country have an extra year to buy a home and still qualify. Also to aid purchasers, Congress increased the upper income cap. For married filing joint taxpayers, they can have modified AGI (adjusted gross income) of $225,000 before the credit begins to be reduced. Above $245,000, the homebuyer's credit is not allowed. Everyone else is limited to income of $125,000 before the credit is reduced and it's gone by $145,000. While the phaseout limits were increased, there is now a cap on purchases. The maximum purchase price for the credit is $800,000. Buy a more expensive home and no credit.

Added to the bill (Worker, Homeownership and Business Assistance Act of 2009), is the ablity to qualify for a reduced credit if you already own a home. Taxpayers who have lived in their home for 5 consecutive years in the last 8 and meet the income and purchase guidelines can take advantage of a $6500 credit. The new home must still be used as their primary residence but the old home does not need to be sold. The taxpayer can convert it to a rental or investment.

The credit can be taken on either 2009 or 2010 returns but there is a new Form 5405 being created that is to be used. As mentioned in the earlier post, this form can't be electronically filed because a HUD statement must be included in the return to document the sale. This has been an issue with amended 2008 returns taking advantage of the credit this summer. Many taxpayers have been asked to send a wide range of documents to verify they qualify for the credit. This program has been a victim to widespread fraud and it is hoped that this will help cut the fraud.

A reminder

If you sell or stop using as a personal residence a home that you have taken the 1st Time Homebuyer's Credit, you might be subject to some recapture (repayment) of the credit. Since the recapture depends on which credit you took and details of the sales, please check with your tax professional for how your specifics affect the repayment.

Comments

[philippines homes]

This is really a good news for all those first time home buyers. Thanks for the post.

Deirdre G