investingfromtheright

I am retired and take educated guesses on all things financial.

November 16, 2009

November 17, 2009: More Perks For Lucky Homeowners And "Lucky" Taxpayers

Here are the rules contained in the new legislation regarding tax credits for homeowners and first time homebuyers. I believe that the new extension with added benefits will not cause a pop in sales as did the initial program, which expired November 6th. The reason is that homebuyers rushed to get into a home under the former program. That said, I hope I am wrong and that everything will be coming up roses for participants in the real estate transaction process, and for investors in the home construction sector(s).

Here Are The Rules:

1. The credit is available for homes purchased on or after November 6, 2009 and before June 30, 2010. Contracts must be fully ratified before May 1, 2010.

2. The full $8000.00 Tax Credit is for first-time home buyers (either spouse if filing jointly) who have not owned a principle residence during the three year period prior to the purchase. Ownership of vacation/leisure property or rental property does not disqualify home buyers from the program.

3. The maximum credit is $8000.00 or 10% of the home purchase, whichever is less.

4. To qualify for the full tax credit, married couples' modified adjusted gross income (MAGI) must be under $225,000.00 (raised from $150,000 under the prior program). Single filers' MAGI must be less than $125,000.00 (raised from $75,000.00 under the prior program). Partial tax credits are available for married couples with MAGI incomes of over $225,000.00 but under $245,000.00 and single filers with incomes of over $125,000.00 but under $145,000.00. If married couples who qualify for the first-time tax credit file separately, they would both claim 5% of the home purchase or $4000.00 (whichever is less) on their tax returns.

5. The is no recapture or repayment clause if the home is owned for at least thirty-six months.

6. Current Homeowner(s): An individual (if married, the individual's spouse) who has owned and used the same residence as a principle residence for any consecutive-year period during the eight year period ending on the date of purchase of a new principal residence will be eligible for a $6500.00 tax credit ($3250.00 if filing separately).

7. The full amount of the eligible tax credit is refunded to the buyer, regardless of whether the buyer has paid an equivalent amount in taxes.

8. There is a home purchase cap of $800,000.00. There was no cap in the previous program.

9. Special exemptions and extensions for military, members of the Foreign Service of the United States, and employees of the intelligence community: If the individual serves on official extended duty outside of the United States for at least ninety days between December 31, 2008 and May 1, 2010, the deadline for entering into a binding contract to purchase a home will be extended to April 30, 2011. Closing must occur before July 1,2011.

10. The credit is only available to purchasers eighteen years of age and older.

11. The home purchaser(s) must attach a copy of a properly executed settlement statement used to complete the purchase to the tax return.

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