The Worker, Homeowner, and Business Assistance Act of 2009 contains 2 provisions that affect
tax returns filed for the 2008 and 2009 tax years.
Provision 1: Homebuyer Tax Credit
The act makes the following changes to the homebuyer tax credit:
- Taxpayers who buy a home by April 30, 2010 (or who enter into a binding contract to
purchase a home by April 30, 2010, and settle on the purchase by June 30, 2010) may
be eligible to claim the credit.
- For homes purchased after Nov. 6, 2009, the credit is reduced when modified adjusted
gross income (AGI) exceeds $125,000 ($225,000 if Married Filing Jointly) and is
eliminated when modified AGI reaches $145,000 ($245,000 if Married Filing Jointly).
For homes purchased before Nov. 7, 2009, the phaseout limits are $75,000 ($150,000 if
Married Filing Jointly) to $95,000 ($190,000 if Married Filing Jointly).
- Individuals who purchase a home after Nov. 6, 2009, and who owned a home they used as
their main home for at least 5 consecutive years during the 8-year period ending on
the date they purchase a subsequent residence may now claim a homebuyer credit. The
credit for these individuals is equal to 10% of the purchase price with a maximum
credit of $6,500 ($3,250 Married Filing Separately).
- For homes purchased after Nov. 6, 2009, no credit is allowed:
- if the purchase price exceeds $800,000.
- for a home purchased by an individual who is eligible to be claimed as a
dependent by another taxpayer.
- for a purchaser who is less than 18 years of age. (A married taxpayer is
treated as meeting the age requirement if either the taxpayer or the
taxpayer's spouse is at least age 18 on the date of purchase.)
- Also for homes purchased after Nov. 6, 2009, the definition of related party has been
expanded to include a taxpayer's spouse's parents, grandparents, children, etc.
- Members of the Armed Forces and certain federal employees serving outside the U.S.
may be able to claim the credit if they buy or enter into a binding contract to buy a
home by April 30, 2011, and settle on the purchase by June 30, 2011.
The Home Ownership Tax Tip offers a more extensive discussion of these changes.
Provision 2: Net Operating Losses
A net operating loss (NOL) is normally carried back 2 years. Specified losses are carried
back either 3 or 5 years. The Worker, Homeowner, and Business Act allows taxpayers who
sustained a NOL in 2008 and/or 2009 to carry a loss back either 3, 4 or 5 years. The
election can be made for either 2008 or 2009, but not for both years.
A loss that is carried back to the fifth year can't exceed 50% of taxable income for the
carryback year before application of the NOL. Note: Carryback elections that were in effect
on or before Nov. 6, 2009, are not affected by this rule.
The IRS will announce procedures for carrying back an eligible NOL.
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