By JC Leahy, MA Accounting
Maximum Legal Refund (TM)
Income Tax Preparation and Consulting
Silver Spring, Maryland
The clock is ticking on a tax break you may not even know about. The press calls it the "Repeat Home Buyer Tax Credit," --- but don't search for those words on the IRS web site because you won't find them. This credit is actually called the "Long-Time Resident Tax Credit."
Here's what happened. The First Time Home Buyer Tax Credit was supposed to expire on November 6, 2009. The "Worker, Homeownership, and Business Assistance Act of 2009" extended it; however, the extended version was significantly different. The Act changed the income limits, capped the price of a qualifying home, changed some personal eligibility requirements, added a special break for some members of the military and Federal employees, AND extended the credit -- in the reduced maximum amount of $6,500 -- to certain people who already owned homes. This last change, the $6,500, is the Long-Time Resident Credit.
See my earlier article about the First-Time Home Buyer tax credit.
Here's the deal on the Long-Time Resident Credit, aka Repeat Home Buyer Tax Credit:
The amount of the credit is 10% of your new home's price, up to a maximum credit of $6,500. You can close on your new home starting November 7, 2009, ending June 30, 2010. You must have a binding sales contract in place by April 30, 2010. If you are in the military (or you are a qualified Federal employee) serving outside the U.S., you can delay both of those deadlines by one year. You must be over 18 at the time you buy your new home. Dependents do not qualify for this credit -- which is a change. You may not buy a house that costs more than $800,000 and still qualify for the credit. To get the full credit a married couple must make less than $225,000 (MAGI - modified adjusted gross income). Other than for married couples, the MAGI limit is $125,000. Between $225,000 and $245,000 (married) or $125,000 and $145,000 (others), the maximum allowable credit phases out to zero. And, finally, you must have lived in your prior principal residence for 5 of the last 8 years preceding your closing date on the new house -- AND you have to send PROOF of this 5-years' residence WITH your Federal income tax return. By the way, if you are building your new house, rather than buying one, your June 30 deadline applies to your moving in, NOT to your closing on the purchase. .
If you purchased your new home on or after January 1, 2010, you can claim the credit on your 2009 or 2010 tax return.. This is an important point because you might qualify in one year and not the other. Also, you may not file your tax return electronically and claim this credit.
Caution: If you get the credit and then move out of your new home within 36 months, you have to pay it back!!!!
Have a question or comment? Enter it as a "comment" to this Journal article -- I'll be happy to answer questions online.
Need assistance with filing your income tax returns? Call me at Maximum Legal Refund (TM), at telephone 301-537-5365 or e-mail me at firstname.lastname@example.org