| The Worker, Homeownership, and Business | | | | or $245,000 (married) and is reduced proportionally |
| Assistance Act of 2009 has extended the tax credit | | | | for taxpayers with MAGIs between these amounts. |
| of up to $8,000 for qualified first-time home buyers | | | | 5. The income limits for claiming the tax credit were |
| purchasing a principal residence. The tax credit now | | | | raised when the tax credit was extended. Are the |
| applies to sales occurring on or after January 1, 2009 | | | | higher limits retroactive? |
| and on or before April 30, 2010. However, in cases | | | | No. The new income limits are only applicable to |
| where a binding sales contract is signed by April 30, | | | | purchases occurring after November 6, 2009. |
| 2010, a home purchase completed by June 30, 2010 | | | | The income limits for sales occuring on or after |
| will qualify. | | | | January 1, 2009 and on or before November 6, 2009 |
| For sales occurring after November 6, 2009, the Act | | | | are $75,000 for single taxpayers and $150,000 for |
| establishes income limits of $125,000 for single | | | | married couples filing jointly. |
| taxpayers and $225,000 for married couples filing | | | | The Worker, Homeownership, and Business |
| joint returns. | | | | Assistance Act of 2009 has established a tax credit |
| The income limits for sales occurring on or after | | | | of up to $6,500 for qualified move-up/repeat home |
| January 1, 2009 and on or before November 6, 2009, | | | | buyers (existing home owners) purchasing a principal |
| are $75,000 for single taxpayers and $150,000 for | | | | residence after November 6, 2009 and on or before |
| married taxpayers filing joint returns. | | | | April 30, 2010 (or purchased by June 30, 2010 with a |
| 1. Who is eligible to claim the $8,000 tax credit? | | | | binding sales contract signed by April 30, 2010). |
| First-time home buyers purchasing any kind of | | | | 1. Who is eligible to claim the $6,500 tax credit? |
| home—new or resale—are eligible for the tax | | | | Qualified move-up or repeat home buyers purchasing |
| credit. To qualify for the tax credit, a home purchase | | | | any kind of home are eligible to claim this credit. |
| must occur on or after January 1, 2009 and on or | | | | 2. What is the definition of a move-up or repeat |
| before April 30, 2010. For the purposes of the tax | | | | home buyer? |
| credit, the purchase date is the date when closing | | | | The law defines a tax credit qualified move-up home |
| occurs and the title to the property transfers to the | | | | buyer (“long-time resident”) as a home |
| home owner. A limited exception exists for certain | | | | owner who has owned and resided in a home for at |
| contract for deed purchases and installment sale | | | | least five consecutive years of the eight years prior |
| purchases. See the IRS website for more detail. | | | | to the purchase date. For married taxpayers, the law |
| However, the law also allows home sales occurring | | | | tests the homeownership history of both the home |
| by June 30, 2010 to qualify, provided they are due to | | | | buyer and his/her spouse. Repeat home buyers do |
| a binding sales contract in force on or before April 30, | | | | not have to purchase a home that is more expensive |
| 2010. | | | | than their previous home to qualify for the tax credit. |
| Persons who are claimed as dependents by other | | | | 3. How is the amount of the tax credit determined? |
| taxpayers or who are under age 18 are not qualified | | | | The tax credit is equal to 10 percent of the |
| for the tax credit program. | | | | home’s purchase price up to a maximum of |
| 2. What is the definition of a first-time home buyer? | | | | $6,500. Purchases of homes priced above $800,000 |
| The law defines “first-time home buyer” as a | | | | are not eligible for the tax credit. |
| buyer who has not owned a principal residence during | | | | 4. Are there any income limits for claiming the tax |
| the three-year period prior to the purchase. For | | | | credit? |
| married taxpayers, the law tests the homeownership | | | | Yes. The income limit for single taxpayers is |
| history of both the home buyer and his/her spouse. | | | | $125,000; the limit is $225,000 for married taxpayers |
| For example, if you have not owned a home in the | | | | filing a joint return. The tax credit amount is reduced |
| past three years but your spouse has owned a | | | | for buyers with a modified adjusted gross income |
| principal residence, neither you nor your spouse | | | | (MAGI) above those limits. The phaseout range for |
| qualifies for the first-time home buyer tax credit. | | | | the tax credit program is equal to $20,000. That is, |
| However, IRS Notice 2009-12 allows unmarried joint | | | | the tax credit amount is reduced to zero for |
| purchasers to allocate the credit amount to any | | | | taxpayers with MAGI of more than $145,000 (single) |
| buyer who qualifies as a first-time buyer, such as | | | | or $245,000 (married) and is reduced proportionally |
| may occur if a parent jointly purchases a home with | | | | for taxpayers with MAGIs between these amounts. |
| a son or daughter. Ownership of a vacation home or | | | | 5. What is “modified adjusted gross income”? |
| rental property not used as a principal residence does | | | | Modified adjusted gross income or MAGI is defined |
| not disqualify a buyer as a first-time home buyer. | | | | by the IRS. To find it, a taxpayer must first |
| 3. How is the amount of the tax credit determined? | | | | determine "adjusted gross income" or AGI. AGI is |
| The tax credit is equal to 10 percent of the | | | | total income for a year minus certain deductions |
| home’s purchase price up to a maximum of | | | | (known as "adjustments" or "above-the-line |
| $8,000. | | | | deductions"), but before itemized deductions from |
| 4. Are there any income limits for claiming the tax | | | | Schedule A or personal exemptions are subtracted. |
| credit? | | | | On Forms 1040 and 1040A, AGI is the last number |
| Yes. For sales occuring after November 6, 2009, the | | | | on page 1 and the first number on page 2 of the |
| income limit for single taxpayers is $125,000; the limit | | | | form. For Form 1040-EZ, AGI appears on line 4 (as of |
| is $225,000 for married taxpayers filing a joint return. | | | | 2007). Note that AGI includes all forms of income |
| The tax credit amount is reduced for buyers with a | | | | including wages, salaries, interest income, dividends |
| modified adjusted gross income (MAGI) of more than | | | | and capital gains. |
| $125,000 for single taxpayers and $225,000 for | | | | To determine modified adjusted gross income |
| married taxpayers filing a joint return. The phaseout | | | | (MAGI), add to AGI certain amounts of |
| range for the tax credit program is equal to $20,000. | | | | foreign-earned income. See IRS Form 5405 for more |
| That is, the tax credit amount is reduced to zero for | | | | details. |
| taxpayers with MAGI of more than $145,000 (single) | | | | |