Homebuyer Credit Extended and Liberalized

The President on Friday, November 6, 2009 signed the "Worker, Homeownership, and Business Assistance Act of 2009" which gives tax breaks to large corporations and extends the homebuyer's credit

The American Recovery and Reinvestment Act of 2009 extended the first-time homebuyer credit for purchases before December 1, 2009 and increased the credit to $8,000. The new law extends the date to close on a credit eligible purchase to before May 1, 2010. And for purchases subject to a written binding contract by April 30, 2010, the closing would have to be before July 1, 2010.

The credit is no longer restricted to first-time homebuyers. Taxpayers are able to claim the credit on the purchase of a new home if they have owned and used a prior residence as their principal residences for any 5 consecutive-year period during the 8-year period ending on the date of the purchase of the new principal residence. However, the homebuyer credit for these “long-time residents” cannot exceed $6,500.

The credit is phased-out based upon modified Adjusted Gross Income (AGI). The credit begins to be phase-out for joint filers with modified AGI above $225,000 ($125,000 for other filers). Prior to the new law the phase-out began at $150,000 and $75,000 respectively.

The credit is only available for homes with a purchase price of $800,000 or less. Previously there was no price ceiling.

A taxpayer is allowed to elect to treat the purchase as occurring on December 31 of the calendar year preceding the year of purchase in order to accelerate the refund.

The new rules take effect on November 6, 2009.

Net Operating Loss carryback period extended to five years.  

The new law permits any business to elect up to a 5-year carryback for net operating losses (NOLs) incurred in either 2008 or 2009, but not both. Businesses are able to offset 50% of the available income from the fifth year and 100% of all income in the remaining four carryback years. Eligible small businesses already had the ability to elect to carryback their 2008 NOLs either 3, 4, or 5 years under the American Recovery and Reinvestment Act. These small businesses are able to elect to carryback losses from 2009 up to 5 years. Additionally, the 90% limitation on the use of any alternative tax NOL deduction is suspended for these NOL carryback deductions. The NOL provision is not available to a taxpayer if the federal government acquired an equity interest (or right to acquire such an interest) in the taxpayer under the Emergency Economic Stabilization Act of 2008.

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