Homebuyer Credit Expanded and Extended (Part 4)

Homebuyer Credit Expanded and Extended (Part 4)

The credit is reduced or eliminated for higher-income taxpayers. The credit is phased out based on your modified adjusted gross income (MAGI). Different income limits apply to purchases on or before Nov. 6, 2009 and those after that date. 

For purchases on or before Nov. 6, 2009, for a married couple filing a joint return, the phase-out range is $150,000 to $170,000. For other taxpayers, the phase-out range is $75,000 to $95,000. This means that the full credit is available for married couples filing a joint return whose MAGI is $150,000 or less and for other taxpayers whose MAGI is $75,000 or less.

For purchases after Nov. 6, 2009, for a married couple filing a joint return, the phase-out range is $225,000 to $245,000. For other taxpayers, the phase-out range is $125,000 to $145,000. This means that the full credit is available for married couples filing a joint return whose MAGI is $225,000 or less and for other taxpayers whose MAGI is $125,000 or less. (11/19/09)

Taxpayers cannot claim the credit before there is a completed sale and purchase of the residence. The sale and purchase are generally completed at the time of closing on the purchase. If the taxpayer obtains the "benefits and burdens" of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property.

If you purchased a home that qualifies for the first-time homebuyer credit and will be renting out a portion of the home and if you meet all first-time homebuyer eligibility requirements you still can claim the credit. 

If you purchased a duplex home with two separate dwelling units and will live in one dwelling and will rent out the other dwelling unit you may qualify for the credit for the dwelling unit that you use as your principal residence. To determine the amount of your credit, you must allocate the purchase price of the duplex between the two separate dwelling units. You may not use the entire purchase price of the duplex to determine the amount of your credit.

If you have a specific question regarding this article, as a public service, and at no cost to you, I invite you to call me with your question. Also at no charge, I am happy provide you with a second opinion on your return that was done by another paid preparer.

Call me and I will be happy to explain my “CPA Quality Tax Preparation at H&R Block Rates”™, my many discounts including the Virtual Tax Office eMail-Order Tax Return Discount of $50 and how you can, in general, minimize your tax preparation fees regardless of who prepares your tax returns. To read previously published tax articles go to www.danghazel.com. You can contact me at info@danghazel.com or call me at 305-451-4224 or 540-825-2771.

Thank you for your interest in reading my tax column. This column is offered as a public service with the understanding that each person's tax situation is different; that you should consult your CPA before taking any action based upon comments made in this article.