Congress Extends First-time Homebuyer Credit
Congress Extends First-time Homebuyer Credit
Congress has extended the first-time homebuyer tax credit into the first half of 2010. The credit was scheduled to expire after November 30, 2009. The extension increases the income phase out amounts and includes current homeowners in some benefits.
According to trade reports, the first-time homebuyer credit has generated more than 300,000 home sales above otherwise expected sales, helping to reduce excess new construction inventory.
First-time Homebuyer Credit
The original first-time homebuyer credit rewarded eligible individuals with a tax credit worth 10% of a home’s value up to a maximum credit of $8,000 after the purchase of a qualified residence. The credit phased out for single individuals with modified adjusted gross incomes (MAGI) in excess of $75,000 and for married couples filing jointly with MAGI above $150,000. Qualifying buyers could purchase a property with a maximum price of $800,000.
Extension Terms
The new legislation extends the beginning November 7, 2009 through June 30, 2010. To qualify, sale contracts must be issued by April 30, 2010 and the sale must close by June 30, 2010.
Increased Income Limits
Single individuals may earn up to $125,000 to be eligible for the total credit amount. Joint filers may earn up to $225,000 to be eligible for the total credit amount.
Current Homeowners
Current homeowners can benefit from a maximum $6,500 tax credit, if they have occupied their primary residence for a period of five consecutive years during the last eight years.
Tax Credit Abuses
The news is not all good. The IRS is reportedly investigating more than 100 civil fraud cases related to the first-time homebuyer credit. In some cases, the IRS is pursuing criminal charges.
A government watchdog told Congress in October that the IRS has paid more than $400 million in bogus claims for the first-time homebuyer credit. Congress has instructed the IRS to crackdown on abuses. The IRS is expected to heighten the substantiation requirements for the credit.
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