Expansion and Extension of Homebuyer Tax Credit
The U.S. Senate and House of Representatives approved the Worker, Homeownership, and Business Assistance Act of 2009. Included in the legislation is an extension of the first-time homebuyers tax credit and an extension of conforming loan limits. New in this legislation is a $6,500 tax credit for homebuyers who have been in their current residence for five years or more. This legislation is being considered in the U.S. House of Representatives today, Nov. 5, 2009. If the legislation is approved, the president is expected to sign it into law over the weekend.
The action of Realtors
® who responded to the National Association of Realtors®' Call for Action made a tremendous impact of the movement of this legislation.
Tax credit
Under current law, the First-Time Homebuyer Tax Credit is a refundable tax credit available to an individual buying a principal residence for the first time. The credit phases out for individuals with income between $75,000 and $95,000, and for joint filers with income between $150,000 and $170,000. For purchases made on or after Jan. 1, 2009 and before Dec. 1, 2009, the tax credit is equal to the lesser of $8,000 or 10 percent of the purchase price of the residence. Individuals must repay the credit only if the principal residence is disposed of within 36 months of purchase. For purchases made on or after April 9, 2008 and before Jan. 1, 2009, the tax credit is equal to the lesser of $7,500 or 10 percent of the purchase price of the residence. Individuals who purchased homes in 2008 are also required to repay the credit over 15 years. This proposal would extend the availability of a homebuyer credit to homes under a binding contract before April 30, 2010, allowing 60 days to close. The key modifications are as follows: 1) The credit is phased out for individuals with income above $125,000 and for joint filers with income above $225,000. 2) An $8,000 credit is available to all first-time homebuyers. The tax credit will be extended upon enactment until April 30, 2010. 3) A $6,500 credit is available to homebuyers who have been in their current residences for the last five years or more. This will go into effect on the legislation enactment date.
November 5, 2009
4) The credit is available only for the purchases of principal residences with purchase prices of $800,000 or less. 5) The legislation incorporates a proposal in the Service Members Home Ownership Tax Act of 2009. This proposal eliminates the recapture requirement for military personnel, including members of the Foreign Service and intelligence community, who were forced to sell as a result of an official extended duty of service. It allows military personnel serving outside the U.S. for at least 90 days in 2009 or 2010 one additional year to qualify for the credit. 6) The proposal includes anti-fraud language. 7) The proposal also includes math-error authority for the Internal Revenue Service (IRS).
Conforming Loan Limits
The extension of the current Federal Housing Administration (FHA) and conforming loan limits (125 percent of median home price up to $729,750) through Dec. 31, 2010 has been added to the legislation; the president should sign this into law over the weekend. This will have an enormous impact on the availability of loans in higher-priced areas.
More information will be made available after the final legislation passes. For more information, contact Government Affairs Director Elizabeth Barnhardt at elizabeth.barnhardt@carolinahome.com.
November 5, 2009
RISMEDIA, November 9, 2009—President Barack Obama has approved the first-time homebuyer tax credit extension which will extend the tax credit until April 30, 2010.
The extension is part of a $24 billion economic stimulus bill that will extend the $8,000 tax credit for homebuyers who are purchasing their first home from the current November 30 deadline and expands the program to offer a credit of $6,500 to homeowners who have lived in their current home for at least five years and are seeking to relocate.
The following details apply to the homebuyer tax credit expansion:
Who is Eligible
-First-time homebuyers, who are defined by the law as buyers who have not owned a principal residence during the three-year period prior to the purchase, may be eligible for up to an $8,000 tax credit.
-Existing homeowners who have been residing in their principal residence for five consecutive years out of the last eight and are purchasing a home to be their principal residence (“repeat buyer”), may be eligible for up to a $6,500 tax credit.
-All U.S. citizens who file taxes are eligible to participate in the program.
Income Limits
Homebuyers who file as single or head-of-household taxpayers can claim the full credit ($8,000 for first-time buyers and $6,500 for repeat buyers) if their modified adjusted gross income (MAGI) is less than $125,000.
-For married couples filing a joint return, the combined income limit is $225,000.
-Single or head-of-household taxpayers who earn between $125,000 and $145,000, and married couples who earn between $225,000 and $245,000 are eligible to receive a partial credit.
-The credit is not available for single taxpayers whose MAGI is greater than $145,000 and married couples with a MAGI that exceeds $245,000.
Effective Dates
-The eligibility period for the tax credit is for homes purchased after Nov. 6, 2009, and before May 1, 2010. However, home purchases subject to a binding sales contract signed by April 30, 2010, will qualify for the tax credit provided closing occurs prior to July 1, 2010.
Types of Homes that Qualify
-All homes with a purchase price of less than $800,000 qualify, including newly-constructed or resale, and single-family detached, townhomes or condominiums, provided that the home will be used as their principal residence. Vacation home and rental property purchases do NOT qualify.
Tax Credit is Refundable
-A refundable credit means that if the amount of income taxes you owe is less than the credit amount you qualify for, the government will send you a check for the difference.
-For example:
-A first-time buyer who qualifies for the full $8,000 credit who owes $5,000 in federal income taxes would pay nothing to the IRS and receive a $3,000 payment from the government. If you are due to receive a $1,000 refund, you would receive $9,000 ($1,000 plus the $8,000 first-time homebuyer tax credit).
-A repeat buyer who owes $5,000 would pay nothing to the IRS and receive $1,500 back from the government. If you are due to get a $1,000 refund, you would get $7,500 ($1,000 plus the $6,500 repeat buyer tax credit).
-All qualified homebuyers can take the tax credit on their 2009 or 2010 income tax return.
Payback Provisions
The tax credit is a true credit. It does not have to be repaid unless the home owner sells or stops using the home as their principal residence within three years after the purchase.
The www.federalhousingtaxcredit.com site is being updated. Check the site next week for more detailed information on the new tax credit.
For more information, visit www.nahb.org.
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