New Law May Help Homeowners

Monday, December 14 2009

More American homebuyers will get tax relief thanks to changes made to the first–time homebuyer credit. The popular credit is now more accessible to existing homeowners and first–time homebuyers in three ways:

• Through a tax credit worth up to $6,500 for existing homeowners in the market for a new home.
• Through a new closing deadline of April 30, 2010 — extended from Nov. 30, 2009 — for the $8,000 first–time homebuyer credit. Also, a special provision gives taxpayers two extra months to close if they’ve entered into a contract by April 30, 2010.
• By increased phase–out limits that start at $125,000 for singles and $225,000 for married filing jointly — up from $75,000 and $125,000 respectively. The new limits apply to homes purchased after Nov. 6, 2009.

Existing homeowners must have owned and lived in their current home continuously for five of the last eight years to claim the credit of up to $6,500. Taxpayers must close on the replacement home between Nov. 7, 2009, and April 30, 2010. If taxpayers have entered into a contract on a home by April 30, 2010, they have until June 30, 2010, to close.

A house must be valued at less than $800,000 to be eligible for the new $6,500 or the $8,000 credit for first–time homebuyers. Taxpayers can claim the credit on their 2009 or 2010 tax returns. A completed settlement statement must be attached to the return in order to claim the credit.

Source: H&R Block