Tax Credit
What You Should Know - $8,000 Homebuyer Tax Credit Extension FAQs
• New legislation passed through the United States Congress has
extended and expanded the first-time homebuyer tax credit. The tax
credit now applies to sales occurring on or after January 1, 2009
and on or before April 30, 2010. However, the law also allows home
sales occurring by June 30, 2010 to qualify, provided they are due
to a binding sales contract on or before April 30, 2010.
The extended Act covers sales occurring after November
6, 2009, and
establishes income limits of $125,000 for single taxpayers and $225,000
for married couples filing joint returns. The new law:
• Extends the deadline for purchasing and closing on a home
• Authorizes the credit for long-time homeowners buying a replacement
primary
• Raises the income limitations for homeowners claiming the credit
The Worker, Homeownership, and Business Assistance Act of 2009 has
also established a tax credit of up to $6,500 for qualified move-up/repeat
home buyers (existing home owners) purchasing a primary residence
after November 6, 2009 and on or before April 30, 2010.
Below are basic questions and answers regarding the extended $8,000
Homebuyer Tax Credit and the $6,500 move-up/repeat buyer credit.
For more in-depth queries, we encourage you to consult a qualified
tax advisor or professional.
Questions/Answers regarding the $8,000 Homebuyer Tax Credit:
How is this home buyer tax credit different from the tax credit that
Congress enacted in early 2009?
The previous tax credits applied only to first-time home buyers.
Also, the expanded tax credit’s income limits were increased, the
documentation requirements were tightened, and the program’s deadlines
were extended to April 30, 2010.
What is the credit?
The first-time homebuyer credit is a tax credit included in the Housing
and Economic Recovery Act of 2008. For homes purchased in 2009, the
credit operates like an interest-free loan because it must be repaid
over a 15-year period. The credit was expanded for homes purchased
into 2010.
Who is eligible for the $8,000 tax credit?
First-time home buyers purchasing any kind of home—new or resale—are
eligible for the tax credit. To qualify for the tax credit, a home
purchase must occur on or before April 30, 2010. For the purposes
of the tax credit, the purchase date is the date when closing occurs
and the title to the property transfers to the home owner.
How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price
up to $8,000.
What are the income limits for claiming the $8,000 tax credit?
For sales occurring after November 6, 2009, the income limit for
single taxpayers is $125,000, and $225,000 for married taxpayers
filing a joint return. The tax credit amount is reduced for buyers
with a modified adjusted gross income (MAGI) of more than $125,000
for single taxpayers and $225,000 for married taxpayers filing a
joint return.
The income limits for claiming the tax credit were raised when the
tax credit was extended. Are the higher limits retroactive?
No. The new income limits are only applicable to purchases after
November 6, 2009.
What types of homes will qualify for the $8,000 tax credit?
Any home used as a primary residence will qualifies for the credit,
provided the home is purchased for a price less than or equal to
$800,000. This includes single-family detached homes, attached homes
like townhouses and condominiums, manufactured homes (mobile homes)
and houseboats.
Instead of buying a new home from a builder, I constructed a home
on a lot that I already own. Do I still qualify for the tax credit?
Yes. For the purposes of the home buyer tax credit, a primary residence
constructed by the homeowner is treated by the tax code as having
been “purchased” on the date the owner first occupies the house.
In this situation, the date of first occupancy must be on or after
January 1, 2009 and on or before April 30, 2010 (or by June 30, 2010,
provided a binding sales contract was in force by April, 30, 2010).
I bought a home in 2008. Do I qualify?
No. But if you purchased your first home between April 9, 2008 and
January 1, 2009, you may qualify for a different tax credit. Consult
with your tax advisor for more information.
If I’m qualified for the tax credit and buy a home in 2009 (or 2010),
can I apply the tax credit against my 2008 (or 2009) tax return?
Yes. The law allows taxpayers to choose to treat qualified home purchases
in 2009 (or 2010) as if the purchase occurred on December 31, 2008
(or if in 2010, December 31, 2009). A benefit of this election is
that a homebuyer in 2009 or 2010 will know their prior year MAGI
with certainty, thereby helping the buyer know whether the income
limit will reduce their credit amount.
Questions/Answers regarding the $6,500 move-up/repeat buyer credit:
Who is eligible to claim the $6,500 tax credit?
Qualified move-up or repeat home buyers who owned their current homes
at least 5 years purchasing any kind of home are eligible to claim
this credit. To qualify, buyers have to be in a purchase agreements
by April 30, 2010 and close on or before June 30, 2010.
How is the amount of the tax credit determined for the $6,500 tax
credit?
The tax credit is equal to 10 percent of the home’s purchase price
up to a maximum of $6,500. Purchases of homes priced above $800,000
are not eligible for the tax credit.
Are there any income limits for claiming the $6,500 tax credit?
Yes. The income limit for single taxpayers is $125,000, and the limit
is $225,000 for married taxpayers filing a joint return.
How do I claim the tax credit?
Claim the tax credit on your federal income tax return. Home buyers
should complete IRS Form 5405 to determine their credit amount, and
then claim this amount on line 67 of the 1040 income tax form for
2009 returns (line 69 of the 1040 income tax form for 2008 returns).
What types of homes will qualify for the tax credit?
Any type of home that will be used as a primary residence will qualify
for the credit, provided the home is purchased for a price less than
or equal to $800,000.
