Little Known Facts About the Homebuyer Tax Credit
The Worker, Homeownership and Business Assistance Act of 2009, signed into law on Nov. 6, 2009, extended and expanded the homebuyer tax credit. Under the new law, April 30, 2010, to buy a principal residence 2010. You must close on the new home by June 30, 2010.
While both first-time homebuyers and existing or previous home owners can take advantage of the tax credit, the IRS gets the final say on who and who does not qualify.
Here are some little-known "interpretations" of the homebuyer tax credit that most people are not aware of:
- Any home that is purchased as your principal residence and is located in the United States qualifies. This means the homebuyer tax credit is not available for homes purchased in the US Territories - it's available only in the 50 states.
- When you buy a 2-, 3- or 4-unit home and occupy one of the units as your primary home, you can claim up to 10% ($8000 maximum tax credit) of the unit you will occupy - NOT the entire sales price. Example: If you bought a duplex for $100,000, your "cost basis" is $50,000 (one-half of $100,000) and the maximum homebuyer tax credit you can claim would be 10% of $50,000, or $5,000.
- Income limits for the homebuyer tax credit are based on your adjusted gross income. Your income can exceed $125,000 (single) and $225,000 (married) by up to $20,000 and you will still qualify for a partial homebuyer tax credit based upon a modified adjusted gross income (MAGI) formula created by the IRS.
- For New Construction, the "date of purchase" is considered the date you occupy the property - NOT the closing date or the start-or-construction date.
- Homes sold on "Land Contract" or "Contract for Deed" can qualify for a homebuyer tax credit. If the taxpayer obtains the "benefits and burdens" of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include:
- the right of possession;
- the right to obtain legal title upon full payment of the purchase price;
- the right to construct improvements;
- the obligation to pay property taxes;
- the risk of loss;
- the responsibility to insure the property; and
- the duty to maintain the property.