Important Topics:
First-Time Homebuyer Tax Credit Extended and Liberalized
Emergency Economic Stabilization Act
First-Time Homebuyer Tax Credit Extended and Liberalized - NEW!!!
On November 6, 2009, the First-Time Homebuyer Tax Credit was extended and liberalized to allow more potential homebuyers to benefit from the refundable tax credit. The credit allows certain homebuyers to claim a refundable credit equal to 10% of the purchase price of a primary residence, limited to $8,000 ($4,000 for married taxpayers filing separately). There are several key changes that have been made to this tax credit:
Deadline Extended
The credit has now been extended to include primary residences purchased before May 1, 2010. Additionally, if a written and signed agreement is in place before May 1, 2010, buyers have been afforded two additional months and are still able to claim the credit if they close on the house before July 1, 2010. It is important to note the purchase date definition used by the IRS. For all existing homes, the date of purchase is considered to be the date of settlement. For all new construction, the date of purchase is considered to be the first date of occupancy by the homebuyer(s).
Credit Expanded to Include "Long-Time Residents"
In addition to "first-time homebuyers," the credit has now been expanded to include "long-time residents." Long-time residents are taxpayers who have owned the same primary residence for any 5-consecutive year period within the 8-year window ended on the purchase date. For long-time residents, purchase dates must fall between November 6, 2009 and May 1, 2010 (or July 1, 2010 if a written and signed agreement is in place before May 1, 2010). The 10% purchase price credit is limited to $6,500 for long-time residents (#3,250 for married taxpayers filing separately). It is important to note that a long-time resident is NOT required to sell their existing home in order to qualify for the credit, as long as the purchased home becomes the taxpayer(s) primary residence upon purchase.
Credit Phaseout Limits Increased
For purchases after November 6, 2009, the credit phases out for single taxpayers with Adjusted Gross Income (AGI) between $125,000 and $145,000 and phases out for married (filing jointly) taxpayers with AGI between $225,000 and $245,000. This is a significant increase over the AGI phaseout ranges in place prior to the November 6, 2009 changes.
New Home-Price Limitation
For purchases after November 6, 2009, there is now a home-price limitation. If the purchase price of the primary residence is greater than $800,000, the credit is completely eliminated. There is no phaseout range for this limitation. If the purchase price exceeds the limit by even $1, the entire credit is elminated.
For more information regarding this updated tax credit or to learn how you can take advantage of this tax saving opportunity, please call our office at (717) 336-3801.
Emergency Economic Stabilization Act
Congress passed the Emergency Economic Stabilization Act of 2008 on October 3, 2008. The Act has several key provisions that may affect your company. Most notably, the research and development credit, the credit for hiring people from disadvantaged groups, and the new markets tax credit have all been extended through 2009.
In addition, 15-year straight-line depreciation for qualified leasehold improvements and restaurant renovations has been restored retroactively for assets placed into service in 2008 and extended for assets placed into service in 2009. The 15-year depreciation may be used for improvements added to restaurants “if more than 50% of the building’s square footage is devoted to the preparation of, and seating for on-premises consumption of, prepared meals” (IRC Sec. 168(e)(7)(A)(ii)), as well as qualified restaurant buildings themselves, if placed into service in 2009. Similar improvements are usually depreciated over a 39-year period. The Act also added a provision for qualified retail store improvements to be depreciated straight-line over a 15-year period if they are placed into service in 2009. Qualified retail store improvements are those real property improvements to the interior portion of nonresidential buildings that are (1) open to the public and used to sell tangible goods, and (2) placed into service more than three years after the building itself was originally placed into service.
The Act also provided for several key changes for individuals. Some of the most notable changes include: AMT exemption amounts for 2008 have been increased to $65,950 for married couples filing jointly, $46,200 for singles, and $34,975 for married couples filing separately; IRA holders over the age of 70½ may once again transfer up to $100,000 to an eligible charity tax-free in 2008 and 2009; the $4,000 deduction for higher education expenses has been extended through 2009; expenses incurred by teachers for classroom supplies up to $250 is extended through 2009; and the option to deduct state and local sales tax or state and local income tax, whichever is higher, has been re-instated through 2009 (if deducting sales tax, you may use actual receipts or the IRS-provided table plus receipts for big-ticket items). Additionally, taxpayers that do not itemize deductions will be allowed to deduct property taxes in addition to the standard deduction in 2008 and 2009, with a maximum deduction of $1,000 for married couples and $500 for singles. Also, the energy credits for solar equipment, fuel cells, and energy-efficient improvements to an existing home were extended through 2016.
Be sure to contact us if you have any additional questions concerning the Emergency Economic Stabilization Act and what it means to you.
