Last week congress overwhelmingly passed the “Worker, Homeownership, and Business Assistance Act of 2009.” This bill, which is expected to be signed into law shortly, includes several important tax law changes (one of those changes could result in a windfall for your business).
The most published change in this bill is the extension of the First-Time Homebuyer Tax Credit. Under current law, the first-time homebuyer tax credit is an $8,000 refundable tax credit available to an individual buying a principal residence for the first time. The credit is phased out for individuals with income over $95,000 and for joint filers with income over $170,000. The credit was set to expire on November 30, 2009. This bill extends and liberalizes the credit by making it available to higher income taxpayers and also to existing homeowners.
The credit has now been extended to April 30, 2010, which is expected to help stabilize the housing market. The bill also increased the phase out for individuals to $125,000 and for joint filers to $225,000.
The bill will now allow existing homeowners to get in on the government subsidy. A credit of $6,500 is available for homebuyers who have lived in a home that they owned and was their primary residence for 5 consecutive years over the past 8 years and they must not have income exceeding $125,000 for single taxpayers and $225,000 for married couples. One key point is that you CANNOT use the credit to buy a vacation home, only primary residences are eligible.
Another key piece of the bill is the Five-Year Carryback of Net Operating Losses. Under current law, net operating losses may generally be carried back for two years. As I had written in August, the American Recovery and Reinvestment Act of 2009 extended the net operating loss carryback period from two to five years for tax years beginning in or ending in 2008 for small businesses.
This new bill would allow all businesses to carryback net operating losses for up to five years for losses incurred either in 2008 or 2009. These carrybacks result in instant refunds and could be a windfall for your business. Businesses would be able to offset 50 percent of the available income from the fifth year and 100 percent of all income in the remaining four carryback years. Small businesses who have already elected to carry back 2008 under the American Recovery and Reinvestment Act may also elect to carry back losses from 2009.
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What is the earliest date you can close on a home to qualify for the $6500 existing home buyer credit? Is it November 7, 2009 or December 1, 2009 or other?
Posted by: Jim | November 09, 2009 at 12:12 PM
I assume rental properties do not qualify for the credit, correct?
Posted by: Jim B | November 11, 2009 at 02:28 PM
Liars, cheats, and thieves.
Trying to keep the economy propped up with borrowed money until the 2010 elections.
Posted by: W.C. Varones | November 15, 2009 at 11:34 AM