The Worker, Homeownership and Business Assistance Act of 2009 was signed into law on November 6, 2009, and extends and expands the previously passed first-time homeowners tax credit.
There are three major sections to be mentioned (for detailed information about the new law, click here).
§ The credit was set to expire on November 30, 2009.
§ The first-time homeowner tax credit is available for those eligible taxpayers who enter a binding home buying contract for a principal residence on or before April 30, 2010.
§ The eligible taxpayer must close on the home by June 30, 2010.
§ The amount of the credit remains at 10% of the purchase price, up to $8,000.
§ The taxpayer can take this credit on either their 2009 or 2010 returns using form 5405.
§ The tax credit remains fully refundable, meaning the credit will be paid out to the homeowner even if their tax obligation is less than the amount of the credit.
§ The homeowner does not have to repay this credit unless the home ceases to be the homeowner's principal residence within 36 months of closing.
§ You are not eligible for this credit if you purchase a home from a close relative including: spouse, parent, grandparent, child or grandchild.
§ You are not eligible for this credit if you owned a home at any time during the three years prior to this purchase.
§ This law authorizes a tax credit for those homeowners who have owned their principal residence for at least five consecutive years (out of an eight-year period) and purchase a new principal residence.
§ This tax credit goes to a maximum of $6,500.
3. Raises the Income Limitation
§ This provision only applies to those people who have purchased homes after November 6, 2009.
§ The credit phases out for individuals with a modified adjusted gross income between $125,000 and $145,000.
§ The credit phases out for joint filers with a modified adjusted gross income between $225,000 and $245,000.
§ For those who purchased the home prior to November 6, 2009, the original phase out schedule applies.