There was a lot of buzz leading up to November 6th 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 next spring.  A first time homebuyer is defined as a person who has not had owned a principal residence for the past 3 years.  Those eligible must be in a binding contract by April 30th, 2010 and must settle on their home by June 30th, 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 attach their settlement sheet and Form 5405 to their 2009 or 2010 1040 tax return.  As long as the homebuyer stays in their purchased home for three years after the purchase, the credit never needs to be repaid.  Now that’s something to make you feel cozy and at home!

If you have any questions or would like more information, please contact:

Susan Martin

Posted in