Question: We purchased our first home in 2009. Do we qualify for the Homebuyer Credit?
Answer: There was a lot of buzz leading up to Nov. 6, 2009, when President Obama signed the Worker, Homeownership and Business Assistance Act of 2009. Along with extending other tax incentives, the Act extends and expands upon the existing First Time Homebuyer Credit that was set to expire on November 30th of this year.
The $8,000 refundable tax credit for first time homebuyers was extended until late spring. A first time homebuyer is defined as a person who has not owned a principal residence for the past three years. Those eligible must be in a binding contract by April 30, 2010 and must settle on their home by June 30, 2010.
The new Act also offers a credit for existing homeowners. A homebuyer who has lived in their principal residence for the past five out of eight years and purchases a new principal residence is entitled to a $6,500 refundable credit. The same time limits apply as stated above for first time homebuyers.
Both credits only apply to purchases of a principal residence and have phase out limitations. Phase outs for the credit start when taxpayers have modified adjusted gross incomes of $125,000 for single filers and $225,000 for joint filers.
In order to claim the credit, taxpayers will need to have their tax preparer attach their settlement sheet and Form 5405 to their 2009 or 2010 1040 tax return. Returns claiming the credit cannot be e-filed but are required to be paper filed. As long as the homebuyer stays in their purchased home for three years after the purchase, the credit never needs to be repaid.
This information was provided by Cover & Rossiter.
Middletown, Del. —
