First-Time Homebuyer Tax Credit Extended and Expanded

December 8, 2009Articles The Legal Intelligencer

Capital Gains

The Worker, Homeownership, and Business Assistance Act of 2009, signed into law by President Obama on Nov. 6, extends and expands the scope of the first-time homebuyer tax credit, which was originally enacted in 2008. The new act also closes a number of loopholes that allowed for the abuse of this tax credit.

The first-time homebuyer tax credit, contained in Section 36 of the Internal Revenue Code, was enacted to provide first-time purchasers of a principal residence (home, condo or co-op) with a refundable tax credit equal to the lesser of $8,000 ($4,000 for a married individual filing separately) or 10 percent of the purchase price. The credit was allowed for qualifying home purchases on or after April 9, 2008, and before Dec. 1, 2009, (for purchases before Jan. 1, 2009, the dollar limits were $7,500 or $3,750 for a married individual filing separately).

The act generally extends the credit to apply to a principal residence purchased by the taxpayer before May 1, 2010. The credit will also now apply to the purchase of a principal residence that closes before July 1, 2010, if the taxpayer entered into a written binding contract for the purchase before May 1, 2010.

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