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Julie M. Sturgeon: A bit of good news for first-time home buyers

It's Your Money

Posted: May 13, 2009 5:54 p.m.
Updated: May 13, 2009 5:51 p.m.
 
The First-Time Homebuyer Credit has been extended and enhanced. Use it and you might be able to benefit on your 2008 income tax return, even if you bought or built your home during 2009.

Some of the changes are:

n The expiration date. The revised credit is available for U.S. homes purchased through November 30, 2009.

n The amount. The new maximum amount you can claim on a home purchased in 2009 is $8,000 ($4,000 if you’re married filing separately).

n
The payback requirement for 2009 purchases. Under the enhanced rules, if you buy a home in 2009 and use it as your main residence for at least 36 months from the purchase date, you’re not required to repay the credit.

What stays the same?
n The definition of a first-time homebuyer. You’re considered a first-time homebuyer if your new home is the only primary residence you (and your spouse, if you’re married) have owned during the three years prior to the purchase date.

n The phase-out. The credit is reduced when your modified adjusted gross income is between $75,000 and $95,000 ($150,000 and $170,000 for married filing jointly).

n The payback requirement for 2008 purchases. If you closed on your home prior to December 31, 2008, you’ll still have to repay the credit (maximum for 2008 purchases is $7,500) in interest-free equal installments over 15 years. The first payment is due with your 2010 income tax return.

The new law offers the option of claiming the expanded 2009 First-Time Homebuyer Credit on your 2008 federal income tax return or on your 2009 return. You can amend an already-filed 2008 return to include it. Since the credit is refundable, you may be eligible for a refund, even if you have no tax liability.

Other exceptions, restrictions and limitations apply.

The California state tax credit is for new-home purchases. Under the law, the definition of new home is one that has never been occupied. The purchase must be between March 1, 2009 and before March 1, 2010. The seller must complete a form 3528-A certifying that the home has never been occupied, and provide a copy to the buyer or escrow person.  The escrow person may submit this form by fax to the Franchise Tax Board within one week of the close of escrow.

Receipt of the form does not constitute an allocation of the credit to the Buyer. The buyer must wait for confirmation from the FTB that the credit has been allocated to him and can only claim the credit if he has received the allocation credit notification. The FTB has a total of $100 million to allocate and will allocate the credit on a first-come, first-serve basis. As of April 29, 2009, approximately $47 million had been claimed.

The allocated credit amount is up to $10,000, or 5 percent of the purchase price. The credit can only be claimed on an on-time-filed tax return including extensions and applied over three consecutive years. The home buyer must live in the home at least two years.

For more information regarding this credit, please visit www.ftb.ca.gov/individuals. See the first item under “what’s new.”
Julie M. Sturgeon is a certified public accountant in Valencia, specializing in individual and business tax issues. “It’s Your Money” appears Thursdays and rotates between a handful of the valley’s financial professionals. Her column represents her own views and not necessarily those of The Signal.

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