On November 6th, President Obama signed the “Worker, Homeownership, and Business Assistance Act of 2009” into law. This new Act created some changes to the First-Time Homebuyer Credit that could be very beneficial to several taxpayers.

The Act extended the First-Time Homebuyer Credit to apply to a principal residence purchased by the taxpayer before May 1, 2010.

The credit also applies to the purchase of a principal residence before July 1, 2010 by any taxpayer who enters into a binding contract before May 1, 2010 and closes on the purchase of the residence before July 1, 2010.

The Act also made the First-Time Homebuyer Credit available for existing homeowners who are long-time residents.  For principal residences that were purchased after November 6, 2009, any individual (and, if married, the individual’s spouse) who has maintained the same principal residence for any 5-consecutive year period during the 8-year period ending on the date of the purchase of a subsequent principal residence is considered a first-time homebuyer. The maximum allowable credit for qualifying taxpayers is $6,500 ($3,250 if married filing separately) or 10% of the purchase price of the subsequent principal residence. The First-Time Homebuyer Credit is also now available to higher income taxpayers. For purchases after November 6, 2009, the credit phases out for individual taxpayers with modified adjusted gross income between $125,000 and $145,000 ($225,000 and $245,000 for joint filers) for the year of purchase.

In order to help prevent abuse of the First-Time Homebuyer Credit, the Act has made the following changes for purchases after November 6, 2009.

The credit cannot be claimed unless the taxpayer has attained 18 years of age as of the date of purchase (a married taxpayer is treated as meeting the age requirement if the taxpayer’s spouse meets the age requirement).

The credit is not allowed unless the taxpayer attaches to the relevant tax return a properly executed copy of the settlement statement used to complete the purchase.

If you have any questions regarding the changes to the First-Time Homebuyer Tax Credit, please contact the Tax Department at SS&C.