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First-Time Homebuyer Tax Credit Extended and Improved!

After months of the National Association of Realtors® petitioning for an extension of the first-time homebuyer tax credit and financial analysts voicing concerns that the end of the first-time buyer tax credit would stall the noticeable momentum that the housing market has sustained over the last several months, President Obama came to the rescue. On Friday, November 6, he signed the “Worker, Homeownership and Business Assistance Act of 2009” into law.

The new bill calls for an extension of the current first-time homebuyer tax credit of $8,000 but also has several enhancements. For starters, individual tax payers with modified gross incomes of $125,000 to $145,000 and joint filers with modified adjusted gross incomes between $225,000 and $245,000 now qualify for the credit. The previous limits were $75,000 to $95,000 and $150,000 to $170,000 respectively and still apply to purchases prior to November 6, 2009.

Another highly anticipated caveat of the bill is that long-time existing homeowners can also qualify for a credit of up to $6,500 when purchasing a new primary residence. In order to take advantage of this, they must have lived in their existing home for any consecutive 5 out of the last 8 years.

A third enhancement of the new bill is the addition of more flexibility regarding deadlines for purchasing and closing on a home. Under the previous bill, in order to be eligible for the tax credit, the home buyer would have had to close on a home on or before the expiration date (which was November 30, 2009). According to the new bill, as long as the applicant has entered into a binding contract by the deadline of April 30, 2010 and closes by June 30, 2010, they will be able to claim the credit.

All in all, the new bill should help carry home sales through the first half of 2010 so long as interest rates remain low and keep affordability in tact. Remember, a 1% increase in rates is equivalent to 10% less purchasing power.

For more detailed information about the new bill, please visit

http://www.irs.gov/newsroom/article/0,,id=204671,00.html
 

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