Rev. date: 01/01/2011
The
Housing and Economic Recovery Act of 2008
created a new refundable tax credit, beginning in 2008, for individuals who are
qualified first-time homebuyers of a principle residence in the United States.
Tax Topic 611 explains the general rules that apply to this credit for 2008.
The
American Recovery and Reinvestment Act of 2009 made changes to the credit for qualified purchases made in
2009.
Original Rule Changes For 2009:- Qualifying taxpayers who buy a home after December 31, 2008,
and before December 1, 2009, can claim a first-time homebuyer credit of 10% of
the home's purchase price, up to $8,000 ($4,000 for married filing separately).
- Qualified 2009 homebuyers do
not
have to repay the credit, provided the home remains their main home for 36
months after the purchase date.
- Taxpayers who qualify for the 2009 credit can elect to claim
the credit either on their 2008 tax return or on their 2009 tax return.
- A taxpayer (or taxpayer's spouse) who previously qualified
for the District of Columbia first-time homebuyer credit is not disqualified
from claiming the first-time homebuyer credit under the Internal Revenue Code.
- A taxpayer whose home was financed by the proceeds of tax-exempt
mortgage revenue bonds is not disqualified from claiming the first-time
homebuyer credit.
The
Worker, Homeownership, and Business Assistance Act of 2009
added special provisions for members of the armed forces and extended the
First-time Homebuyer Credit deadline to include qualifying purchases made by
taxpayers who enter into a written binding contract before May 1, 2010, to close
on the purchase of a principal residence before July 1, 2010.
The Homebuyer Assistance and Improvement Act of 2010
further extended the closing date to before October 1, 2010, for taxpayers who
enter into a binding written contract before May 1, 2010, to close on the
purchase before July 1, 2010.
Rule Changes For Qualified Purchases Made After November 6,
2009:- Credit Limitation: The credit limit remains $8,000 for qualified
first-time homebuyers, however, long-time residents who owned and used the same
principal residence for any 5 consecutive years of the last 8 years prior to
purchasing a subsequent new principal residence, may now qualify for a tax
credit of up to $6,500.
- Repayment of Credit: Qualified 2010 homebuyers do not have
to repay the credit, provided the home remains their main home for 36 months
after the purchase date.
- Income Limitation Is Increased: The Modified Adjusted Gross
Income Limitation at which the credit will begin to be phased-out is increased
to $125,000 for single taxpayers and $225,000 for joint filers.
- Purchase Price Limitation: No credit shall be allowed for the
purchase of any residence if the purchase price of such residence exceeds
$800,000.
- Restriction for Age and Dependents: No credit shall be allow
for the purchase of any residence unless the homebuyer (or spouse if married)
has attained age 18 as of the date of such purchase. In addition, no buyer may
take a credit if he or she can be claimed as a dependent on someone else's
return.
- Documentation Requirement: Buyers will be required to submit
a copy of their settlement statement to claim the tax credit.
- Claiming the Credit: Under the new law, as under the old, 2009
homebuyers may claim the credit on either their 2008 or 2009 returns, and 2010
buyers may claim their credit on either their 2009 or 2010 returns.
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