Homebuyer Tax Credit Extended and Expanded

The President signed into law this morning the latest homebuyer tax credit. Some highlights of the new law are outlined below.

The provisions of this new law apply to any purchases made as of today’s date. This means that any first-time buyer who couldn’t close before December 1, 2009 (the original expiration date) now need not worry about losing out on the credit. It also means that the newly qualifying repeat buyers will receive the credit on any qualified closing starting today.

Some key provisions of the new tax credit include:

• An extension of the credit to cover any purchase of a principal residence by qualifying buyers who are under contract by April 30, 2010 and close by June 30, 2010.
• An expansion of coverage in two ways:

1. Broadens those eligible to more than first-time buyers.

“LONG-TIME RESIDENTS OF SAME PRINCIPAL RESIDENCE” now qualify. These are buyers who have “owned and used the same residence as such individual's principal residence for any 5-consecutive-year period during the 8-year period ending on the date of the purchase of a subsequent principal residence.” Quoting from H.R. 3548 as passed by the House and Senate.

• The credit amount for these buyers is 10% of the purchase price to a maximum of $6,500. Any qualifying buyer purchasing a home costing more than $65,000 will receive the full amount (See the purchase price limitation below).

• The credit still applies to first-time buyers (which includes anyone who has not owned a home for the past three years). The credit amount for these buyers remains at 10% of the purchase price to a maximum of $8,000. Any qualifying buyer purchasing a home costing more than $80,000 will receive the full amount (See the purchase price limitation below).

2. Raises the income limits.

• The full credit amounts are available to single persons who earn $125,000
  ($225,000 for married couples) or less. The previous limits were $75,000
  (singles) and $150,000 (married couples).
• A reduced credit is available for incomes above those amounts, with no credit available above $145,000 for singles, and $245,000 for married couples.

• A new limitation in the form of a cap on the purchase price. No credit will be available to an otherwise qualifying buyer who purchases a home costing more than $800,000.
• A new anti-fraud provision, which requires that the buyer claiming the credit to attach to the tax return a properly executed copy of the settlement statement used to complete the purchase.

If you are planning to take advantage of the tax credit, be sure to check with your accountant or tax attorney for all of the details. The IRS website will also have some additional information on the new provisions. Visit http://www.irs.gov/ to learn more.