TAX CREDIT UPDATE ~ GOOD NEWS

 The Hansen Ohana wants you to know:

First-Time Homebuyer Credit 

Updated Nov. 6, 2009, to reflect new legislation — more to be added soon 

New Legislation 

New legislation, the Worker, Homeownership and Business Assistance Act of 

2009, which was signed into law on Nov. 6, 2009, extends and expands the 

first-time homebuyer credit allowed by previous Acts. The new law: 

• Extends deadlines for purchasing and closing on a home. 

• Authorizes the credit for long-time homeowners buying a replacement 

principal residence. 

• Raises the income limitations for homeowners claiming the credit. 

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. 

For the first time, long-time homeowners who buy a replacement principal 

residence may also claim a homebuyer credit of up to $6,500 (up to $3,250 for 

a married individual filing separately). They must have lived in the same 

principal residence for any five-consecutive year period during the eight-year 

period that ended on the date the replacement home is purchased. 

People with higher incomes can now qualify for the credit. The new law raises 

the income limits for homes purchased after Nov. 6, 2009. The credit phases 

out for individual taxpayers with modified adjusted gross income (MAGI) 

between $125,000 and $145,000 or between $225,000 and $245,000 for joint 

filers. The existing MAGI phase-outs of $75,000 to $95,000 or $150,000 to 

$170,000 for joint filers still apply to purchases on or before Nov. 6, 2009. 

 

General Information 

 

Homebuyers who purchased a home in 2008 or 2009 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. 

• Reduces a taxpayer’s tax bill or increases his or her refund, dollar for 

dollar. 

• 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. 

The credit is claimed using Form 5405, which you file with your original or 

amended tax return.