First-time homebuyer credit

The 2008 law gives first-time homebuyers a tax credit equal to 10 percent of the purchase price of the home up to $8,000 ($4,000 for married individuals filing separately). The credit is only available to buyers of their principal residence made after December 31, 2008 and before November 30, 2009. Unlike the 2007 law, this first-time homebuyer credit does not have to be repaid provided the homeowner resides in the home for 36 months.

The credit phases-out for married couples with modified adjusted gross income (AGI) between $150,000 and $170,000, and for single taxpayers with modified AGI between $75,000 and $95,000.  Also, to be eligible to claim the credit, an individual (or his or her spouse, significant other or otherwise a co-owner) must not have had any type of ownership interest in a principal residence during the three-year period before the date that the principal residence, for which the credit is to be taken, is purchased.

The Worker, Homeownership, and Business Assistance Act of 2009

The 2009 law extends the deadline for qualifying home purchases from Nov. 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.

But the new law also provides a “long-time resident” credit of up to $6,500 to others who do not qualify as “first-time homebuyers.” 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.

For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns.

The new law raises the income limits for people who purchase homes after Nov. 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 homes purchased prior to Nov. 7, 2009, existing MAGI limits remain in place. The full credit is available to taxpayers with MAGI up to $75,000, or $150,000 for joint filers. Those with MAGI between $75,000 and $95,000, or $150,000 and $170,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.

To claim the credit a copy of the HUD statement must be submitted to the Internal Revenue Service.