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 principal 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, the
Worker, Homeownership, and Business Assistance Act of 2009, and the
Homebuyer Assistance and Improvement Act of 2010
made changes to the credit for qualified purchases made in 2009 and 2010.
First-time homebuyers who buy a home after December 31, 2008, and before May 1,
2010, can claim a refundable credit of 10% of the homes purchase price, up to
$8,000 ($4,000 for married filing separately). Taxpayers who enter into a
binding written contract before May 1, 2010, to close on the purchase before
July 1, 2010, can also claim the credit if they close before October 1, 2010.
General Rules For Purchases Made in 2009 or 2010:- Qualified 2009 and 2010 first-time homebuyers do
not
have to repay the credit, provided the home remains their main home for 36
months after the purchase date.
- 2009 first-time homebuyers may claim the credit on either their 2008 or 2009 returns, and 2010 first-time homebuyers may claim the credit on either their 2009 or 2010
returns.
- 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.
- Documentation Requirement: To claim the credit on 2009 or 2010 tax returns, taxpayers are required to submit a copy of their settlement
statement.
Special Rules 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 principal residence, may now qualify for a tax credit of up to
$6,500.
- 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 allowed 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.
- Restriction for Purchases from Related Persons: The definition of related person now includes persons related to the taxpayer's spouse (i.e.,
in-laws).
Special Rule for Members of the Armed Forces: Members of the Armed Forces have until April 30, 2011 (or June 30, 2011, for taxpayers who entered into a binding contract before May 1, 2011) to purchase a home if they (or their spouse if married) were on qualified official extended duty outside the United States for at least 90 days during the period beginning after December 31, 2008, and ending before May 1,
2010.
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