Long-time and First-time Homebuyer Tax Credit Extension and Expansion

Legislative changes in November 2009 expanded and extended the first-time homebuyer credit and also added documentation requirements for claiming the credit. The IRS is increasing its compliance checks. This means that documentation is now particularly important in claiming the credit. Improper documentation could result in a denial of the credit or an increased wait time for a refund. The Worker, Homeownership and Business Assistance Act of 2009, signed into law on Nov. 6, 2009, extends and expands the first-time homebuyer credit allowed by previous Acts. Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return. The new law also authorizes the credit for long-time homeowners buying a new principal residence and raises the income limitations for homeowners claiming the credit. Homebuyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the first-time homebuyer credit. The credit applies only to homes used as a taxpayer’s principal residence. The credit reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar. The credit is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed. To qualify as a “long-time homebuyer” you must have owned and used the same home as your principal residence for at least five consecutive years of the eight-year period ending on the date you by your new principal residence. For an eligible taxpayer who, for example, bought a home on Nov. 30, 2009, the eight-year period would run from Dec. 1, 2001, through Nov. 30, 2009. If you would like more information specific to your circumstances, click here to contact Paul.

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