The Homebuyer Tax Credit

Is it for you?
By John D’Angelo
I get questions almost weekly asking about the current homebuyer tax credit. In fact, the two most frequent are “What do I do if I settle on my home after my return is already filed, but still want the credit?” and the most popular, “I already have a home [or owned one before], can I still get the credit?”
The U.S. housing market, as surely we are well aware, has been in a slump for quite a while now. In an attempt to address the economic challenges facing our nation, Congress recently passed new legislation designed to continue to spur the housing market and the economy at large and help prospective buyers share in the ‘American dream’ of homeownership.
The Basics:
•    The First-Time Home Buyer Tax Credit of up to $8,000 for first-time home buyers was extended until April 30, 2010.
•    The credit has been expanded to extend up to $6,500 of tax credit to certain current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010. So if you are a home owner and purchase a new primary residence, the credit may be available for you too.
Who Qualifies for the Extended Credit?
•    First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.
•    Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.
To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

If you or your client purchased a home between January 1, 2009 and November 6, 2009, please call your tax advisor or go to www.irs.gov for more info.
Which Properties Are Eligible?
The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.
How is a Buyer’s Credit Amount Determined?
Each home buyer’s tax credit is determined by two additional factors:
1.    The price of the home. Under the Extended Home Buyer Tax Credit, credit may only be awarded on homes purchased for $800,000 or less.
2.    The buyer’s income. Under the Extended Home Buyer Tax Credit, which is effective on November 7, 2009, single buyers with incomes up to $125,000 and married couples with incomes up to $225,000—may receive the maximum tax credit. The credit phases out once income exceeds these amounts.

Can a Buyer Still Qualify If He/She Closes After April 30, 2010?
Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.
Will the Tax Credit Need to Be Repaid?
It depends. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale.
Credit Claimed on a 2009 or 2010 Tax Return
For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns.
Taxpayers claiming the credit on their 2009 returns, no matter when the house was purchased, must use the new version of Form 5405. Taxpayers who claim the credit on their 2009 tax return will not be able to file an electronic return, but instead will need to file a paper return.
In many instances, obtaining this credit may involve filing an amended tax return or if you have specific questions or need additional information, please contact a tax professional or the Internal Revenue Service at (800) 829-1040.

John D’Angelo is the Shareholder of D’Angelo and Company (www.dangeloco.com).