Home Buyer Tax Credit Info
New legislation, the Worker, Homeownership and Business Assistance Act
of 2009, which was signed into law on Nov. 6, 2009, extends and expands
the first time home buyer credit allowed by previous Acts.
The new law extends through the spring of 2010 a temporary tax credit of up to $8,000 for some first time home
buyers. The law also adds a new tax
credit of up to $6,500 for certain repeat home buyers.
Here are some answers to common questions about the new rules.
Q: What has stayed the same in the new law?
1) First time home buyers still get a credit of as much as 10% of
the purchase price, up to a maximum $8,000. "First-time" means people,
including both partners of a married couple, who haven't owned a
principal residence for three years before the purchase.
2) All taxpayers who claim a credit must use the home as a principal residence for the next three consecutive years.
3) The credits offer dollar for dollar reductions of tax and are
refundable. This means that a taxpayer who doesn't pay enough tax to
offset the credit can get a refund. For example, if you qualify for an
$8,000 credit but only owe $5,000 in tax, you could receive a $3,000
check from the Internal Revenue Service.
4) Under the new law 2008 buyers may claim
the credit on either their 2008 or 2009 returns, and 2010 buyers may
claim the credit on either their 2009 or 2010 returns.
5) Taxpayers do not qualify for a credit if they buy from a lineal
ancestor or descendant, including parents or grandparents and children
or grandchildren.
Q: What has changed?
Several important features took effect as of Nov. 6 2009:
1) To take advantage of the tax credits, a buyer must have a
contract in place before May 1, 2010, and the deal must close before
July 1, 2010. No further extension is expected.
2) The price of the house is now capped. For purchases made after
Nov. 6, no credit is available for any home costing more than $800,000.
3) There is now a tax credit for repeat buyers as well as for
first time buyers. Taxpayers who have lived in one residence for five
consecutive years of the past eight can now qualify for a tax credit of
as much as 10% of the purchase price, up to a maximum $6,500, of a new
principal residence. The new home does not have to cost more than the
old one.
4) Income limits for people who qualify for a tax credit are far
more generous than under the previous law. For single filers, the
credits now phase out between $125,000 and $145,000 of modified
adjusted gross income; for married couples, the range is $225,000 to
$245,000. For most people, modified adjusted gross income will be the
same as adjusted gross income.
5) People taking the tax credit, as under the old law, aren't
allowed to buy a home from a lineal ancestor or descendant. The new
law, applying to purchases made after Nov. 6, also says a person may
not take a credit if the home is purchased from a spouse or the
spouse's lineal relatives.
Q: If I bought a house last spring or summer, can I get a tax credit?
You qualify if you are a first time buyer and meet the other
requirements, but not if you are a repeat buyer. The new credit for
repeat buyers applies only to purchases made after Nov. 6.
Q: What is the definition of "principal residence"?
If you own more than one home, your principal residence is usually
the one where you spend most of your time. In determining residence the
IRS may also consider where your family lives and your mailing address
for bills and correspondence, among other factors.
Q: Can a principal residence be something besides a conventional house?
Yes. A principal residence may also be a condominium, co-op
apartment, attached or semi-attached townhouse, or even—if it has
eating, sleeping and toilet facilities—a boat, motor home or trailer.
Manufactured homes qualify in some states.
Q: Does the person who claims the credit have to use the home as a principal residence?
Yes.
Q: If I buy a new home and live in it, do I also have to sell my old one in order to take advantage of the credit?
This is unclear. The law appears to allow repeat buyers to retain
their old home, for which no tax credit was given, while claiming a
credit for the new one. What is clear is that if you buy a new home
using the credit, you must use it as your principal residence.
Q: How may the credits be allocated among two or more unmarried buyers?
This also is unclear. But if the IRS adopts the rules that applied
to the previous tax credit, which are detailed in IRS Notice 2009-12,
there is room for planning. The notice says that taxpayers may use "any
reasonable manner" to allocate the credit. It even provides an example
in which two unmarried buyers allocate the credit to the lower earner
in order to qualify for it.
Q: I need the credit refund to help make the down payment. What can I do?
There's no rushing the IRS. But one option is to adjust your current
withholding from your paychecks to reflect the fact that you will be
taking the credit later. But be careful: If you don't make the
purchase, then you may owe interest and penalties. Consult a tax
adviser.
Q: Is it possible to qualify for a credit if I am building a home on a lot I already own?
Yes, according to the National Association of Home Builders. The
purchase date is usually considered to be the date of first occupancy,
so you would need to move in before July 1, 2010.
Q: May I take a credit if I am building a large addition to my home?
No; these credits apply only to the purchase of a home.
Q: Are there special rules for the military?
Yes. In general, members of the military and foreign service and
intelligence communities who are serving overseas on "official extended
duty" for at least 90 days during 2009 and the first four months of
2010 have an extra year to take advantage of these credits. Consult a
tax adviser who specializes in this area.
Click the links below for more information:
First time Home Buyer Tax Credit Info From IRS
First Time Homebuyer Credit Questions and Answers From IRS: Homes Purchased in 2008
First Time Homebuyer Credit Questions and Answers From IRS: Homes Purchased in 2009
Answer for First Time Homebuyer Credit from IRS
Question Regarding Repeat Home Buyer Tax Credit
Question Regarding the First Time Home Buyer Tax Credit
Freddie Mac's On line Guide to the Home Buying Process
Rob Jones Your York Pa Realtor
Connecting Buyers and Sellers in York Pa
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