Latest Update On Extension of Homebuyers Tax Credit

Good News! President Obama signed H.R. 3548 on Friday morning, Nov. 6, 2009, enacting into law an extension and adjustment of the $8,000 tax credit for first-time buyers.

Here are some of the highlights of this new extension:

• Adds money for certain move-up buyers
• Creates one deadline for signing a contract and a later deadline for closing
• Changes income requirements
• Limits a purchased home’s cost to $800,000

First-time Homebuyers

Most of the details for first-time homebuyers are the same rules that currently exist. The maximum tax credit remains $8,000 ($4,000 for married individuals filing separately), and anyone who has not owned a home within three years is considered a “first-time buyer.”

• A purchase must be under contract by April 30, 2010.
• A purchase under contract by April 30 must close no later than June 30, 2010.
• After Dec. 1, 2009, income limits rise to $125,000 for singles and $225,000 for married couples. This increases the limits that were in place effective through Nov. 30 of $75,000 for singles and $150,000 for married couples. The tax credit phases out incrementally at each $20,000 increase in income.
• Effective immediately: The maximum home value purchased cannot exceed $800,000. Prior to the law being signed, first-time homebuyers had no limitation on a home’s cost.

Current Homeowner Tax Credit

Here’s some great news for homeowners that wish to ‘upgrade’ to another home. An existing homeowner who purchases a home may now claim a tax credit of up to $6,500. In order to qualify, the owner must have owned and used the same residence as a principal residence for any consecutive five-year period in the previous eight years. This new tax credit is effective immediately. Eligible homebuyers do not have to wait until Dec. 1 to close in order to qualify. Personal income limits, maximum home value, and contract/closing deadlines are the same as those for first-time homebuyers.

Additional Changes

The new law requires a buyer to attach documentation about the home purchase to his or her income tax return. An audit found that some buyers are claiming the tax credit when they don’t deserve it, and investigators continue to seek out fraud. To minimize tax abuse going forward, buyers won’t receive the credit without submitting proof to the Internal Revenue Service (IRS).

E-File Florida is uniquely positioned to help taxpayers/homebuyers through the maze of purchasing their new home and applying for the First Time Homebuyer’s Credit. We are licensed in real estate as well as income taxes. Feel free to call or email us with any questions you may have. We are here to serve YOU.

IRS CIRCULAR 230 Required Notice – IRS regulations require that we inform you as follows: Any Federal tax advice contained in this communication (including any attachments) is not intended to be used and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction as tax related matter(s).