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"I just signed into law a bill that will help grow our economy, save
and create new jobs and provide relief to struggling families and
businesses."
--President Barack Obama,
November 6, 2009
A newly signed law is expected to help jump start the real estate
market because it provides valuable incentives not just to
first-time homebuyers, but to other taxpayers who already own homes.
The Worker, Homeownership, and Business Assistance Act of 2009 also
contains benefits for unemployed Americans, struggling businesses
and others. Here are the highlights:
1. The homebuyer tax credit is extended for first-time
purchasers and a modified credit is now provided to more people.
Under a previous law, there is a temporary federal tax credit for
first-time homebuyers, which is worth up to $8,000 for eligible
purchases between January 1 and November 30, 2009 ($4,000 for
married taxpayers filing separately). To qualify for the credit, the
home sale must have closed by November 30, 2009, when the tax break
was set to expire. Merely having a contract by that date was not
enough.
Under the new law, there is an extension of the first time homebuyer
credit until April 30, 2010. (However, if a homebuyer signs a
binding contract before May 1, 2010, and the transaction closes
before July 1, 2010, the credit is still available.)
Expansion of the credit: Effective for home purchases after November
6, 2009, a smaller credit is also available to "long-time residents
of the same principal residence." In other words, you don't have to
be buying a home for the first time to claim a credit of up to
$6,500 ($3,250 for married taxpayers filing separately). How does
the law define "long-time residents?" To qualify, a homeowner must
have owned and used the same principal residence for any consecutive
five-year period in the eight-year period that ends with the new
home purchase date.
A range of people can benefit from the credit expansion. For
example, a couple can "move up" from a $300,000 home to a $500,000
residence and claim the credit, as long as they meet the income
limits explained below. An older "empty nest" couple downsizing from
a $500,000 home to a $300,000 residence may also be able to benefit,
if they meet the other requirements.
Higher income limits. Under the previous law, the homebuyer credit
was phased out for single taxpayers with modified adjusted gross
incomes (MAGI) of $75,000 to $95,000 ($150,000 to $170,000 for
married couples filing jointly). Under the new law, the phase-out
begins at $125,000 for single taxpayers and $225,000 for married
joint filers.
New limit on the purchase price. Under the new law, houses with a
price of more than $800,000 are not eligible for the credit. This
limit applies to homes purchased after the new law's enactment date
of November 6, 2009.
2. All businesses can elect to carry back net operating
losses (NOLs) incurred in 2008 or 2009. The new law includes a
significant expansion of the NOL rules, which were scheduled to
expire this year. Under a previous law, small businesses (defined as
having average
Missing an IRS Refund?
The IRS is looking for taxpayers who haven't received 107,831 refund
checks that were returned by the post office due to mailing address
errors.
Affected taxpayers must update their addresses. The IRS will then
send out all checks due. Undeliverable refund checks average $1,148
this year. Some taxpayers are due more than one check.
If a refund check is returned to the IRS, taxpayers can generally
update their addresses with the "Where's My Refund?" tool on
www.IRS.gov. The tool enables taxpayers to check the status of
refunds.
gross receipts of $15 million or less) could elect to carry back
2008 net operating losses (NOLs) for either three, four, or five
years to claim refunds of federal income taxes paid in earlier
years. This was a beneficial exception to the general NOL carryback
rule, which allows businesses to carry back most losses only two
years.
The new law expands a similar election to all businesses -- no
matter how high their gross receipts are. Under the Worker,
Homeownership, and Business Assistance Act, businesses can carry
back NOLs for up to five years, but in the fifth year, there is a 50
percent income limit on the NOL offsets.
It can be a great way for eligible businesses that are hurting in
today's economy to improve cash flow with a refund of taxes they
paid years ago when profits were up.
This is just a basic outline of NOLs. For more information, contact
your tax adviser.
3. Unemployment benefits are extended for individuals who
have lost their jobs. The new law provides more federal benefits for
unemployed Americans. Specifically, it extends benefits by at least
14 weeks -- and 20 weeks in states that have unemployment rates of
more than 8.5 percent.
However, the new law does not extend the exclusion from gross
income, for federal tax purposes, $2,400 of unemployment benefits
received this year. That provision is scheduled to end on December
31, 2009.
President Obama signed the new law on the same day that federal
government figures were released showing that the nation's
unemployment rate was up to 10.2 percent -- the highest level since
1983.
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