President Barack Obama signed a law that extends through next spring a temporary tax credit of up to $8,000 for some first-time home buyers, which was due to expire Nov. 30. The law also adds a new tax credit of up to $6,500 for certain repeat home buyers. We’re already seeing the effect of these programs in our areas, with isolated spikes in sales throughout the region, and inventory shortages still affecting some price ranges. First-time homebuyers still get a credit of as much as 10% of the purchase price, up to a maximum $8,000. “First-time” means people, including both partners of a married couple, who haven’t owned a principal residence for three years before the purchase. All taxpayers who claim a credit must use the home as a principal resi- dence for the next three consecutive years. The credits offer dollar-for-dollar reductions of tax and are refundable. This means that a taxpayer who doesn’t pay enough tax to offset the credit can get a refund. For example, if you qualify for an $8,000 credit but only owe $5,000 in tax, you could receive a $3,000 check from the Internal Revenue Service. Under the new law, as under the old, 2009 home buyers may claim the credit on either their 2008 or 2009 returns, and 2010 buyers may claim the credit on either their 2009 or 2010 returns. Taxpayers do not qualify for a credit if they buy from a lineal ancestor or descendent. Some additional important changes in the new law are as follows: 1) To take advantage of the tax credits, a buyer must have
a contract in place before May 1, 2010, and the deal must close before July 1, 2010. No further extension is expected. 2) There is now a tax credit for repeat buyers as well as for firsttime buyers. Taxpayers who have lived in one residence for five consecutive years of the past eight can now qualify for a tax credit of as much as 10% of the purchase price, up to a maximum $6,500, of a new principal residence. The new home does not have to cost more than the old one. 3) Income limits for people who qualify for a tax credit are far more generous than under the previous law. For single filers, the credits now phase out between $125,000 and $145,000 of modified adjusted gross income; for married couples, the range is $225,000 to $245,000. For most people, modified adjusted gross income will be the same as adjusted gross income. 4) The new law contains antiabuse measures designed to stem fraud, which became a problem with the previous home-buyer tax credit. Most buyers must be 18 or older, and no taxpayer may take a credit if he or she is claimed as a dependent on someone else’s return. Taxpayers taking the credit will also have to furnish proof of purchase 5) People taking the tax credit, as under the old law, aren’t allowed to buy a home from a lineal ancestor or descendent. The new law, applying to purchases made after Nov. 6, also says a person may not take a credit if the home is purchased from a spouse or the spouse’s lineal relatives. On a totally separate topic, Shrewsbury residents have a new online source for information that specifically dedicated to their community. It’s called the Shrewsbury Lantern, and it can be found at www.shrewsbury. net. In just two short weeks, it’s developed quite a readership, and is definitely worth checking out. Steve Levine is an agent for REMAX First Choice and President of Steve Levine Inc. He has been ranked 9 years as the top REMAX Agent in New England and can be found on the web at www. stevelevine.com, by phone at 508 735-4663, or by email at [email protected]. Excerpts and data for this article courtesy of WSJ and Laura Sanders.