Still here in 2010: Tax Credit

Looking for some economic sunshine? Buy a first home and earn a tax credit of up to $8,000 – and the paperwork’s gotten easier. The First-Time Homebuyer’s Credit has been extended to purchases under contract by April 30, 2010 and closed by June 30, 2010. For members of the armed forces serving at least 90 days outside the United States, the credit can be used until June 30, 2011.

For purchases made after November 7, 2009, the income limits for eligibility have also been expanded. The credit does not start to phase out until Modified Adjusted Gross Income exceeds $125,000 for single taxpayers and $225,000 for married couples filing jointly. That wide range helps more people qualify for this credit.

Further, the credit can be claimed by homeowners buying a new principal residence if they have lived in their current home for at least five of the last eight years. For repeat purchasers, the credit is capped at $6,500.

Of course, there are limits. The right to use the credit is phased out as Adjusted Gross Income (AGI) rises from $75,000 to $95,000 on a single return, or $150,000 to $170,000 on a joint return. For example, if you show an AGI of $160,000 on your 2009 IRS return, that’s halfway up the phase-out range, qualifying you for half of the $8,000 credit — $4,000. Still not bad!
Under both the old and the new versions of the law, you can treat the purchase as having taken place on December 31 of the prior year if you want to claim the credit against that year’s taxes. You also can file an amended return for the prior year, if you’ve already filed, so that you can receive the credit immediately rather than waiting to file your 2009 tax return in 2010.
Most qualifying taxpayers will claim the credit of $8,000 for purchases through May 1, 2010 on their tax returns using Form 5405. Your Team Beaufort experts will gladly help you with this and any supporting documentation you may need.