Homebuyer Tax Credit Extended

The economic downturn of the last 12-18 months has left many businesses and homeowners struggling to stay afloat. For those with real estate holdings, home sales have largely slumped across the United States, where an abundance of unsold properties continue to dot the landscape.

In an effort to revitalize the housing industry, The Housing and Economic Recovery Act of 2008 established a tax credit for first-time homebuyers that can be worth up to $7,500. The tax credit has since been increased and extended through the The Worker, Homeownership and Business Assistance Act of 2009, signed into law on November 6, 2009. It extended and expands the first-time homebuyer credit allowed by previous acts.

According to the Internal Revenue Service (IRS), the new Act extends the deadline for qualifying home purchases from November 30, 2009, to April 30, 2010. Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to settle on the purchase. The maximum credit amount remains at $8,000 for a first-time homebuyer -- that is, a buyer who has not owned a primary residence during the three years up to the date of purchase.

The Act also extends to homeowners who have been in a primary residence for five years or more and are looking to purchase a different primary residence. This is a "long-time resident" credit of up to $6,500. To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence.

The new law also raises the income limits for people who purchase homes after November 6. The full credit will be available to taxpayers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers. Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.

For those who have been on the fence about purchasing a home, these tax credits could be the incentive needed. Buyers with qualifying purchases in 2010 have the option of claiming the credit on either their 2009 or 2010 tax returns.

To learn more about the act and first-time homebuyer incentives, visit www.irs.gov.

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