Tiffany Osterli, REALTOR® - Bringing Your Dreams Home

Yuba City, Marysville, Plumas Lake, Sutter, Live Oak, CA Real Estate and Homes for Sale

BRE #01408438
2009-10 First-Time Homebuyer and Move-Up Buyer Federal Tax Credit
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On November 6, 2009, the President signed the Worker, Homeownership, and Business Assistance Act (WHBAA) into law.  Among other things, this new law extends the deadline for the federal first-time homeowner tax credit, provides special benefits for members of the military and certain employees of the federal government, and expands the credit to include "move-up" buyers (those who have owned their homes for five consecutive years of the eight years immediately preceding the purchase of the replacement home).  

In general, the WHBAA gives first-time homebuyers and move-up buyers until April 30, 2010 to enter into contract to buy a home and until June 30, 2010 to complete the transaction in order to claim the credit.  First-timers (including those who did not own a home for the three years preceding the qualifying purchase) are eligible for a credit of up to $8,000 on their federal income tax return.  Move-up buyers can claim a maximum credit of up to $6,500.  Details of the credit are as follows:

FIRST-TIME BUYERS

Eligibility Requirements:

  • You must enter into a binding contract to purchase a home for your primary residence by April 30, 2010.  The purchase transaction must be completed by June 30, 2010.
  • You must qualify as a first-time homebuyer.  This means that neither you nor your spouse, if married, owned your principal residence during the three years immediately preceding the close of escrow on your new home.
  • Your modified adjusted gross income for the year you claim the credit must not exceed $145,000 ($245,000 if married filing jointly).
  • You must have legal residency in the United States.
  • You must not have acquired the home by gift or inheritance, or from a related person as defined by the IRS.
  • The purchase price of the home must not exceed $800,000.

Amount of the Credit:

  • Generally, the credit is capped at either $8,000 ($4,000 if married filing separately) or 10 percent of the purchase price of the home, whichever is less.
  • The credit is progressively phased out so that individuals with modified adjusted gross incomes between $125,000 and $145,000 ($225,000 and $245,000 for joint filers) receive a reduced credit.  If your income falls within the phase-out range, see IRS form 5405 for help calculating your credit.

Repayment Requirements:

  • You must repay the credit only if the home ceases to be your principal residence within three years of the purchase date.  Examples of situations in which you would have to repay the credit are if you sell the home or convert it to a rental property or business within three years of the purchase.  Some exceptions apply for qualified members of the U.S. military and certain other federal employees.  See below for details.

MOVE-UP BUYERS

Eligibility Requirements:

  • You must have lived in the same principal residence for any consecutive five-year period during the eight years immediately preceding the completion of the purchase transaction.
  • You must enter into a binding contract to purchase a replacement home for your primary residence by April 30, 2010.  The purchase transaction must be completed by June 30, 2010.
  • Your modified adjusted gross income for the year you claim the credit must not exceed $145,000 ($245,000 if married filing jointly).
  • You must have legal residency in the United States.
  • You must not have acquired the home by gift or inheritance, or from a related person as defined by the IRS.
  • The purchase price of the home must not exceed $800,000.

Amount of the Credit:

  • Generally, the credit is capped at either $6,500 ($3,250 if married filing separately) or 10 percent of the purchase price of the home, whichever is less.
  • The credit is progressively phased out so that individuals with modified adjusted gross incomes between $125,000 and $145,000 ($225,000 and $245,000 for joint filers) receive a reduced credit.  If your income falls within the phase-out range, see IRS form 5405 for help calculating your credit.

Repayment Requirements:

  • You must repay the credit only if the home ceases to be your principal residence within three years of the purchase date.  Examples of situations in which you would have to repay the credit are if you sell the home or convert it to a rental property or business within three years of the purchase.  Some exceptions apply for qualified members of the U.S. military and certain other federal employees.  See below for details.

MEMBERS OF THE U.S. MILITARY, FOREIGN SERVICE, AND INTELLIGENCE COMMUNITY

The WHBAA added two key benefits for members of the U.S. Armed Forces, the Foreign Service, and the intelligence community:

  • Extra time to purchase a qualifying home.  Federal employees falling into one of the aforementioned categories who serve at least 90 days abroad between January 1, 2009 and April 20, 2010 will have until April 30, 2011 to enter into a binding contract to purchase a home and until June 30, 2011 to complete the transaction (close escrow).
  • Repayment requirement waived.  Federal employees falling into one of the aforementioned categories who cease to use the home as their principal residence within the required three-year occupancy period will not be required to repay the credit if the reason for the home ceasing to be the principal residence is related to official government orders requiring the employee to serve for a minimum of 90 days at least 50 miles away from the principal residence, or if the employee is required to live at least 90 days in government quarters under government orders.

For more information, please visit the IRS' First-Time Homebuyer Credit information page.

 

If you are considering purchasing a home, you may be able to take advantage of this important tax credit.  However, in order to be eligible, you must meet first-time or move-up buyer requirements, you must enter a contract to purchase a home no later than April 30, 2010 and your purchase must be completed (escrow must close) no later than June 30, 2010.  Do not delay!  Inventories are very low and purchase transactions are currently taking longer to close than they have traditionally taken.  If you hope to take advantage of the credit, the time to act is NOW!!!  Contact the Dream Team to get started. 

As always, for questions on matters pertaining to your personal income taxes, the Dream Team recommends that you consult a qualified tax professional.
 
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