Time is running out for home buyers to take advantage of the federal government tax credit known as the Worker, Homeownership, and Business Assistance Act. A home buyer must enter into a binding contract by April 30, 2010, and close and fund the property no later than June 30, 2010 to settle on the purchase.
The maximum credit amount is $8,000 for a first-time homebuyer, which is, a buyer who has not owned a primary residence during the three years up to the date of purchase. The new law also provides a “long-time resident” credit of up to $6,500 to others who do not qualify as “first-time homebuyers”. To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence.
For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns.
The new law raises the income limits for people who purchase homes after November 6. The full credit will be available to taxpayers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers. Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.
Several restrictions on purchases that occur after November 6 go into effect with the new law:
- Dependents are not eligible to claim the credit.
- No credit is available if the purchase price of a home is more than $800,000.
- A pruchaser must be at leat 18 years of age on the date of purchase.
Members of the Armed Forces and certain federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and still qualify for the credit. An eligible taxpayer must buy or enter into a binding contract to buy a home by April 30, 2011, and settle on the purchase by June 30, 2011.
For more details on the credit, visit the First-Time Homebuyer Credit page on www.irs.gov.