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The Worker, Homeownership and Business Assistance Act of 2009 has extended the first time homebuyer credit. The IRS website states that "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." Other changes also allow long-time homeowners who buy a new principal house to qualify for a tax credit, increases the income limitation for homeowners claiming the credit and gives military and certain federal employees serving outside of the United States an extra year to purchase a principal home in the United States and still qualify for the tax credit. These incentives are aimed at making buying real estate such as Minnesota real estate attractive for a certain category of buyers. According to the IRS website "legislative changes in November 2009 expanded and extended the [first time homebuyer] credit and also added documentation requirements for claiming the credit." Furthermore, the site states, taxpayers looking to claim the credit must file a paper return and attach form 5405 as well as a properly executed copy of the statement used to complete the sale. Purchasers of resale homes are asked to include a copy of Form HUD-1, Settlement Statement, or other statement showing the full legal names of the parties to the agreement, the property address, sale price and the closing date. Mobile home buyers may be unable to obtain a settlement statement are asked to include a "copy of the executed retail sales contract showing all parties' names, property address, purchase price and date of purchase. "Buyers of new construction homes "where a settlement statement is not available should include a copy of the certificate of occupancy showing the owner's name, property address and date of the certificate." Additional information and links to obtain and complete the applicable forms can be found on the IRS website at www.IRS.com along with municipality specific instructions. The November 2009 legislation also extends the credit to long-time residents of the same primary residence when they purchase a new primary residence. According to the IRS website the qualification process requires that taxpayers show proof that they have lived in the initial primary residence for a consecutive period of 5 years "during the eight-year period ending on the purchase date of the new home...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." Long-time homeowners who qualify can apply for a credit of up to $6,500 or up to $3,250 for a married individual filing separately. The following requirements for qualification are from the IRS website and apply to homes purchased after November 6, 2009: • "Purchasers must attach a properly executed settlement statement to their return. • No credit is available if the purchase price of the home exceeds $800,000. • The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement. • A dependent is not eligible for the credit. • The new law gives the IRS broader authority to deny first-time homebuyer credit claims, without having to first audit a taxpayer’s return. Known as math error authority, this authority applies, retroactively, to credits claimed on original and amended 2008 returns, as well as to claims yet to be filed." Individuals with higher incomes can now qualify for the credit under the new law when they purchase a home after November 6, 2009. According to the IRS website "The credit phases out for individual taxpayers with modified adjusted gross income (MAGI) between $125,000 and $145,000 or between $225,000 and $245,000 for joint filers. The existing MAGI phase-outs of $75,000 to $95,000 or $150,000 to $170,000 for joint filers still apply to purchases on or before Nov. 6, 2009." "Members of the military and certain other federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the credit. Thus, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2011. If a binding contract is entered into by that date, the taxpayer has until June 30, 2011, to close on the purchase. Members of the uniformed services, members of the Foreign Service and employees of the intelligence community are eligible for this special rule. It applies to any individual (and, if married, the individual’s spouse) who serves on qualified official extended duty service outside of the United States for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010. In many cases, the credit repayment (recapture) requirement is waived for members of the uniformed services, members of the Foreign Service and employees of the intelligence community. This relief applies where a home is sold or stops being the taxpayer’s principal residence after Dec. 31, 2008, in connection with government orders received by the individual (or the individual’s spouse) for qualified official extended duty service. The credit is still allowable even if this happens during the year of purchase. Qualified official extended duty is any period of extended duty while serving at a place of duty at least 50 miles away from the taxpayer’s principal residence (whether inside or outside the U.S.) or while residing under government orders in government quarters. Extended duty is defined as any period of duty pursuant to a call or order to such duty for a period in excess of 90 days or for an indefinite period." The first time homebuyer tax credit has been extended under the Worker, Homeownership and Business Assistance Act of 2009. The time frame for eligible taxpayers have been extended to the 30th day of April, 2010 and close the sale on or before the 30th day of June, 2010. Taxpayers have the option of claiming the credit on either their 2009 or 2010 return. Long-time homeowners who buy a new principal house now qualify for the tax credit. There is also an increase in the income limitation for homeowners claiming the credit. Military and certain federal employees serving outside of the United States get an extra year to purchase a principal home in the United States and still qualify for the tax credit. You can know more at www.agentsranking.com About Author: Chuck Harris is the founder of Agents Ranking; a Minnesota company that helps home buyers and sellers throughout Minnesota connect with the best real estate agent for their particular needs. Agents Ranking provides a unique consulting service free of charge to anyone who wants the best Minnesota REALTOR® possible. You can know more at www.agentsranking.com
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