Tax Law Changes
Provisions of the “Worker, Homeownership, and Business Assistance Act of 2009”
“The Worker, Homeownership, and Business Assistance Act of 2009” has ushered in extensions of the popular first-time home buyer’s credit, and unemployment benefits. There’s also extended help for struggling businesses with a continuation of the carry back net operating losses established in the American Recovery and Reinvestment Act of 2009. Here are more details:
First-time Home Buyer Credit is Extended into 2010, More Home Buyers Will Qualify
The qualification period for first-time home buyers to purchase a home and qualify for the credit will continue through May 1, 2010. First-time home buyers who have not owned a principle residence for 3 years prior to the purchase of a new home will continue to be eligible for a credit of up to $8,000. For homes purchased after December 31, 2008, the credit will not have to be repaid if the home buyer uses the home as their principal residence for 3 or more years. Those serving in the military will not be penalized if they claimed the credit and then have to deploy and sell their home within three years.
In addition, home owners who have owned a home and used it as a principal residence for a 5-consecutive-year period during the 8-year period ending on the date of purchase of a new personal residence may qualify as first-time homebuyers and receive a credit of up to $6,500. To act on this credit, the taxpayer must have a signed purchase contract for a principal residence in force before May 1, 2010 and must close on their home purchase by June 30, 2010 (this also applies to the up to $8,000 credit). This credit is available for purchases of principal residents after November 6, 2009.
The bill also places an upper limit on the value of the purchase of homes after November 6, 2009 of $800,000 to be eligible for the credit. The phase out income level also increases for purchases after November 6, 2009 for joint filers from $150,000 to $225,000 and from $75,000 to $125,000 for all other filing statuses. The credit is not available for taxpayers who adjusted gross income is above $145,000 (up from $95,000) and above $245,000 (up from $170,000) if married filing joint.
Taxpayers who make qualified purchases after December 31, 2008 do not have to repay the amount of the credit if they reside in the home as their principal residence for 36 months after the purchase. When a $7,500 first-time home buyer’s credit was first enacted in 2008, it functioned essentially as a loan and will need to be repaid over 15 years starting on their TY2010 tax return. First-time home buyers in the District of Columbia must choose to either take this credit if they qualify, or the District of Columbia first-time home buyer’s credit, but they cannot claim both.
Relief for the Unemployed, Extension of Unemployment Benefits
There’s also relief for 1.3 million out-of-work Americans facing the end of their unemployment benefits. The act provides for a 14 week extension of unemployment benefits, and six additional weeks of unemployment benefits for those in states with unemployment rates of 8.5 % or more. There’s no extension or increase in the provision for out-of-work Americans to exclude any more than $2,400 of unemployment benefits from total gross income in 2009. (This measure was a part of the American Recovery and Reinvestment Act of 2009).
Extension of the NOL Carryback for Struggling Businesses Allowed in the American Recovery and Reinvestment Act (ARRA) of 2009
ARRA provided that all businesses with average gross receipts of $15 million or less could choose to carry back net operating losses (NOL) from 2008 for 3, 4 or 5 years instead of the normal two years. The new act extends that option for a NOL incurred in 2009, but placed a 50-percent of income limit on the NOL offsets in the fifth carryback year. Struggling businesses can benefit by carrying back the NOL to a profitable year allowing the business to get a refund of much needed cash. The NOL is the excess of the taxpayer’s business deductions over its gross income.
Professional Tax Preparers and Companies Must File Their Customers Returns Electronically in Most Cases
An individual or tax preparation company that files more than 10 tax returns for paying customers must e-file those returns.
