Your Legal Corner - Client Alert Blog
New $6500 Home Buyer Tax Credit For Exisiting Homeowners
Written By: Melissa C. Marsh, Esq.
, California Attorney, November 2009
On November 6, 2009, President Obama signed the Worker, Homeownership and Business Assistance Act of 2009 which extends the Home Buyer’s Tax Credit. Under the new law, first time home buyers (individuals who have not owned a home in the previous 3 years) will be eligible for the $8,000 new home buyer’s tax credit so long as they enter into a purchase agreement on or before April 30, 2010 and close escrow on or before June 30, 2009. In addition, other home buyers, subject to income limits, seeking to replace their principal residence will be eligible for a $6,500 tax credit so long as they have lived in the home they are selling for at least 5 years.
- Home purchased must be a principal residence (not a vacation home or rental)
- Home purchased must cost $800,000 or less
- Applicant must be at least age 18
- Applicant must have a modified adjusted gross income (MAGI) under $145,000 if single; and under $245,000 if married. Although people with higher incomes can now qualify for the tax credit, the credit begins to phase out for individual taxpayers with MAGI between $125,000 and $145,000, and for joint filers with a MAGI between $225,000 and 4245,000.
- The amount of the tax credit available is 10% of the purchase price, up to a maximum of $8,000 for first-time homebuyers and $6,500 for exisiting home owners.
- For qualifying purchases in 2010, taxpayers will have the option of claiming the home buyers tax credit on either their 2009 or 2010 federal tax return. If the credit exceeds the applicant’s tax bill, the IRS will issue a refund payment. Taxpayers who want immediate refunds can amend their tax returns for 2008 to claim the tax credit.
- The tax credit is claimed using IRS Form 5405 which the applicant must file with his or her original or amended tax return.
On a separate note, Fannie Mae has announced a new program that could allow thousands of borrowers on the verge of foreclosure to have the option of renting their homes for a time from the company.
Real Estate Reporter
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