July 2010

If you were well on your way to qualifying for the tax credit of up to $8,000 for homebuyers but could not meet the required June 30 closing date, you may now be able to take advantage of the credit. On July 2, President Obama signed the “Homebuyer Assistance Improvement Act of 2010,” which extended the closing date to September 30, 2010.

To be eligible for the credit, you must have purchased – or entered into a written binding contract to purchase – your home by April 30. It must be your primary residence and be located in the U.S.

“First-time” homebuyers who don’t exceed certain income limits and purchase their residence after November 6, 2009 and before May 1, 2010 can qualify for an income tax credit of the lesser of $8,000 ($4,000 if married filing separately) or 10% of the purchase price. To qualify as a first time homebuyer, you (and your spouse if you are married) must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.

“Long-time resident” homebuyers who don’t exceed the income limits and purchase their subsequent principal residence after November 6, 2009 can qualify for an income tax credit of the lesser of $6,500 ($3,250 if married filing separately) or 10% of the purchase price. They must have maintained the same prior principal residence for any 5-year consecutive period during the eight years ending on the date of purchase of the subsequent residence.

For a married couple filing a joint return, the income limits are $225,000 to $245,000 of modified adjusted gross income, with a reduced credit within that phase-out range. For other taxpayers, the range is $125,000 to $145,000. So the full credit is available for couples filing jointly with modified adjusted gross income of no more than $225,000, and $125,000 for other taxpayers.

Because the credit is fully refundable, qualifying taxpayers will receive the full refund, even if it is more than their tax for the year.

Certain other conditions apply, and the IRS has spelled out the special filing and documentation requirements for anyone claiming the homebuyer credit. Longer periods for completing certain requirements are available for taxpayers on official extended duty service outside the U.S. Contact us for details.