First Time Homebuyer Credit Extended

by Sukhi Boparai CPA

New law. President Obama signed "Worker, Homeownership, and Business Assistance Act of 2009" on Nov 5, which has extended the First Time Homebuyer Credit (FTHTC) along with other provisions.

Now the credit is available to

HIGHER INCOME TAX PAYER:

For single and head of household taxpayers the modified adjusted gross income limit is $125,000. The FTHTC phases out for single and head of household taxpayers with modified adjusted gross income between $125,000 and $145,000

For married (joint filers) taxpayers the modified adjusted gross income limit is $225,000. The FTHTC phase out for joint filers between $225,000 and $245,000.

EXISTING HOME OWNERS - "long-time residents"

Existing home owners residing in their principal residence for five consecutive years out of the last eight, who are purchasing a home to be their principal residence, are eligible for $6,500 credit under the new Act.

FTHTC EFFECTIVE PERIOD EXTENDED:

The houses bought after Nov 6, 2009 and before May 1, 2010 will qualify for the FTHTC.

The houses purchases subject to a binding contact signed before May 1, 2010 and closed prior to July 1, 2010 will also qualify for the FTHTC.

LIMITATION ON HOUSE PURCHASE PRICE:

No FTHTC if the house purchase price exceeds $800,000. You will lose the entire credit if the purchase price exceeds even a single dollar.

NEW ANTI ABUSE PROVISIONS:

No FTHTC is available to the taxpayer if they have not attained the age of 18 years as of the date of purchase. A taxpayer who is married is treated as meeting the age requirement if the taxpayer or his spouse meets the age requirement.

No FTHTC if a taxpayer can be claimed as a dependent by another taxpayer for the tax year of purchase.

No FTHTC is allowed unless the taxpayer attaches a properly executed copy of the settlement statement used to complete the purchase to the tax return.

The new Act amends the definition of a qualifying purchase for FTHTC purposes to exclude the property acquired from a person related to the person acquiring the property or the spouse of the person acquiring the property, if married.

The new Act also expands the definition of mathematical or clerical error for purposes of administration of the credit.

The IRS may assess additional tax without issuance of a notice of deficiency as otherwise required in the case of errors and omissions.

SPECIAL LIBERAL RULES FOR SERVICE MEMBERS

The Act extends the FTHTC for an additional year and waives recapture provisions, for individuals (Members of the Uniformed Services, members of the Foreign Service of the United State and employees of the intelligence community) who are on qualified official extended duty.

Qualified official extended duty means any period of extended duty while serving at a place of duty at least 50 miles away from the taxpayer's principal residence or under orders compelling residence in government furnished quarters.

Extended duty is 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.

EXTENSION OF FTHTC FOR SERVICE MEMBERS OVERSEAS

The expiration date of the first-time homebuyer credit for service members overseas is extended for one year, through April 30, 2011 (June 30, 2011, in the case of an individual who enters into a written binding contract before May 1, 2010, to close on the purchase of a principal residence before July 1, 2011).

WAIVER OF FTHTC RECAPURE

The act also waives the recapture in the case of the disposition of the principal residence for service members in connection with Government orders.