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Tax Planning Letter

New Year 2010

Homebuyer credit extended and expanded in recent law

Are you planning to become a move-up homebuyer? Or do you intend to downsize when you move from your current home? Either way, you may be eligible for a refundable federal tax credit of up to $6,500.

This new tax break is part of the revised first-time homebuyer credit. The Worker, Homeownership, and Business Assistance Act of 2009, a law signed November 6, 2009, also extends the time you have to claim the credit.

This refundable credit is now available through April 30, 2010. If your transaction is incomplete as of April 30, you'll still be able to claim this tax break on your 2009 or 2010 return, provided you have a binding written contract and close by June 30, 2010.

For first-time homebuyers, the amount of the credit remains the same — 10% of the price of your new home, up to a maximum of $8,000. If you used the same residence as your main home for five consecutive years of the eight years prior to buying a new house, you'll also qualify for the credit. However, under this rule, the credit is limited to a maximum of $6,500.

Recapture requirements are unchanged. That means you won't have to pay the money back as long as you live in your new home three years.

Check the chart below for an overview of both the prior and extended credits.


HOMEBUYER CREDIT: An overview


 

— Prior rules —

— Extended and expanded rules —

Purchase Date

Closed on your new home from 1/1/09 through 11/6/09

Closed on your new home from 11/7/09 through 4/30/10 or signed a binding contract by 4/30/10 and closed by 6/30/10

Prior Home

Have not owned a home in the previous three years

Have not owned a home in the previous three years

Have lived in the same home five consecutive years of the previous eight

Credit Amount

10% of the purchase price, up to a maximum of $8,000

10% of the purchase price, up to a maximum of $8,000

10% of the purchase price, up to a maximum of $6,500

Other Requirements

Buy your home from an unrelated party
  • Are not a dependent and are over age 18
  • Buy your home from an unrelated party
  • Buy a home that costs no more than $800,000
  • Attach a copy of your closing statement to your return

Tax Return Year

2008 or 2009 federal income tax return

Preceding- or current-year federal income tax return

Income Limits

$75,000 (singles)
$150,000 (couples)

$125,000 (singles)
$225,000 (couples)




NOTE: This newsletter is issued annually to provide you with information about minimizing your taxes. Do not apply this general information to your specific situation without additional details. Be aware that the tax laws contain varying effective dates and numerous limitations and exceptions that cannot be summarized easily. For details and guidance in applying the tax rules to your individual circumstances, please contact us.