2009 Worker Act Extends Opportunities for First-Time Homebuyer Credit
By: Samuel Evans
If you thought you were unable to take advantage of the First Time Homebuyer Credit because you couldn’t make a home purchase before November 30, 2009, think again. On November 6, 2009 President Obama signed into law the 2009 Worker Act, effectively extending the expiration date of the First Time Homebuyer Credit as well as relaxing requirements to extend the credit to other individuals who may not have been eligible before. You may not even have to be a first-time homebuyer to be eligible for the credit! Those buyers who were on the fence will have the opportunity to cash in on the refundable home-buyer credit for purchases made before May 1, 2010 and for binding sales contracts signed before May 1, 2010 and closing before July 1, 2010.
Similar to it's predecessor, the new credit under the 2009 Worker Act is limited to the lesser of $8,000 or 10% of the home's purchase price. Construction of new homes still applies as a purchase, with the purchase date being the date the taxpayer first occupies the home. In order to avoid having to pay the credit back to the government, the taxpayer must maintain the home as their principle residence for 3 years beyond the date of purchase.
Under the 2009 Worker Act, there are some instrumental changes that will allow more individuals to be eligible for the Homebuyer Credit.
Effective November 6, 2009, phase outs for home-buyers do not take effect until Modified Adjusted Gross Incomes (MAGI) exceed $125,000 for single individuals and $225,000 for individuals filing jointly. Prior to November 6, phase outs began at $75,000 and $150,000 for single and married individuals, respectively. Contact your tax advisor for the calculation of Modified Adjusted Gross Income.
In addition, the new law allows for homebuyers changing residences to be eligible for a $6,500 refundable credit. Those taxpayers who have occupied the same principle residence for 5 consecutive years during the 8 year period prior to the purchase of a new home will be considered first-time homebuyers for the purpose of the reduced credit. The credit is limited to the lesser of 10% of the purchase price of the home or $6,500.
Additional eligibility requirements include that a taxpayer be at least 18 years of age at the date of the home purchase and not be a dependent. The credit shall not apply to the purchase of any residence whose purchase price exceeds $800,000. Qualifying 2009 purchases can be claimed on 2009 or amended 2008 returns and 2010 purchases can be claimed immediately on 2009 returns, or in April 2011 on 2010 returns. Those taxpayers who wish to claim the credit on their 2009 return will be required to paper file. Taxpayers must include a properly executed copy of the settlement statement with their tax return in the year of filing.
Sam Evans is in the tax department at Hancock Askew & Co., LLP.
