Homebuyer Credit Expanded and Extended

Spring, 2010

(Excerpts or paraphrases from the irs.gov website)

The Worker, Homeownership and Business Assistance Act of 2009, signed into law on Nov. 6, 2009, extends and expands (to $8,000) the first-time homebuyer credit allowed by previous Acts.

Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.  

The new law also:

• Authorizes a $6,500 credit for long-time homeowners buying a new principal residence.
• Raises the income limitations for homeowners claiming the credit.  

For qualifying purchases in 2010, you have the option of claiming the credit on either your 2009 or 2010 return.

(From Quest: Alternatively, if you have not already received the credit, you can use it to offset/reduce withholdings until you do file for the credit.)***

Deadlines

• You must have bought — or entered into a binding contract to buy — a principal residence on or before April 30, 2010.
• If you entered into a binding contract by April 30, 2010, you must close (go to settlement) on the home on or before June 30, 2010.

(From Quest: The credit must be repaid if the home is sold in less than 36 months or if the home ceases to be the principal residence during that time.)***

Long-Time Residents: The November 2009 legislation extends the credit to long-time residents of the same main home if they purchase a new main home. To qualify, eligible taxpayers must show that they lived in their old homes for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home. For long-time residents claiming the credit, the IRS recommends attaching, in addition to the documents described above, any of the following documentation of the five-consecutive-year period:

• Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements,
• Property tax records or 
• Homeowner’s insurance records.

There are income limitations:

• If an individual makes $125,000 or higher, they will not be eligible.
• If a couple's joint income is $225,000 or higher, they will not be eligible.

2008 Tax Return

It is still possible to claim the homebuyer credit for 2009 home purchases on 2008 tax returns.

Homebuyers may use the December 2009 revision of the Form 5405  along with Form 1040X to amend their 2008 tax return.

Two new IRS videos in English and Spanish have details.

Members of the military, Foreign Service and intelligence community serving outside the U.S. should investigate benefits in the law that apply particularly to them.

***Go to the IRS website, http://www.irs.gov and speak to your financial advisor to verify how the new law may affect you and for further details. This page from Quest Funding Services is intended only to notify you of the law, or changes to the law, but is not meant to replace the advice of qualified legal or financial counsel.