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The Worker, Homeownership and Business Assistance Act of 2009 was signed into law on November 6, 2009.  This extends and expands the previously passed first-time homeowners tax credit.  There are three major categories to review.


  • The first-time homeowner tax credit is now available for those eligible taxpayers who enter a binding home buying contract for a principal residence on or before April 30, 2010 (previous credit was to expire on November 30, 2009).
  • The taxpayer must close on the purchase by June 30, 2010.
  • The amount of the credit remains at 10% of the purchase price up to $8,000.
  • This credit must be taken on either their 2009 or 2010 tax return using form 5405.
  • The tax credit remains fully refundable, meaning the credit will be paid out to the homeowner even if their tax obligation is less than the amount of the credit.
  • The homeowner does not have to repay this credit unless the home ceases to be their principal residence within 36 months of closing.
  • If the home has been purchased from a close relative including spouse, parent, grandparent, child, or grandchild, the tax payer is not eligible for the credit.  Also, if the tax payer has owned a home any time during the three years prior to this purchase, they are not eligible for the credit.


  • The new law authorizes a tax credit for those homeowners who have owned their principal residence for at least five consecutive years (out of an 8 year period) and purchased a new principal residence.
  • The credit has a maximum of $6,500.

Raising the Income Limitation:

  • The new income provision only applies to those people who have purchased homes after November 6, 2009.
  • The credit phases out for individuals with a modified adjusted gross income between $125,000 and $145,000.
  • For joint filers the credit phases out with a modified adjusted gross income between $225,000 and $245,000.
  • For those purchasing a home prior to November 6, 2009 the original phase out schedule applies.  Individuals were phased out between $75,000 and $95,000.  Joint filers were phased out between $150,000 and $170,000.

There are some restrictions that apply to homes purchased after November 6, 2009:

  • Purchasers must attach a properly executed settlement statement to their return.
  • No credit is available if the purchase price of the home exceeds $800,000.
  • The purchaser must be at least 18 years of age on the date of the purchase.  For a married couple, only one spouse needs to be 18.
  • A dependent is not eligible for the credit.
  • The new law gives the IRS broader authority to deny first-time homebuyer credit claims, without having to first audit the taxpayer’s return.

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