New Federal Tax Legislation

By Levin, Mark H. | The CPA Journal, April 2010 | Go to article overview

New Federal Tax Legislation


Levin, Mark H., The CPA Journal


Home Buyer Credit, Electronic Filing, and Other Provisions

On November 6, 2009, President Obama signed PL 111-092, the Worker, Homeownership, and Business Assistance Act of 2009 (WHBAA). This act has provisions affecting both taxpayers and tax preparers, including the following:

* Extension and modification of the firsttime home buyer credit,

* Modification of the first-time home buyer credit to allow certain long-term homeowners to qualify,

* An increase in the penalty for failure to file a partnership or S corporation tax return,

* An electronic filing requirement for certain tax preparers, and

* An allowance for taxpayers to carry back losses incurred during 2008 or 2009 for up to five years.

The First-time Home Buyer Credit

The WHBAA extends the availability of the first-time home buyer credit through June 30, 2010, for first-time home buyers who enter into a written binding contract for the purchase of their personal residence before May 1, 2010. The amount of the credit is the lesser of either 10% of the purchase price or $8,000 ($4,000 for married taxpayers filing separately).

In addition to first-time home buyers, the WHBAA allows a credit for certain homeowners who have owned and used the same residence as their principal residence for any five-consecutive-year period during the eight-year period ending on the date of the purchase of their new personal residence. These longterm homeowners will be treated as firsttime home buyers with respect to the purchase of a subsequent residence. The amount of the credit allowed to qualified homeowners is the lesser of 10% of the purchase price or $6,500 ($3,250 for married taxpayers filing separately).

The WHBAA also increases the income limitation for the phase-out of the credit. The credit will now phase out for taxpayers with modified adjusted gross income (MAGD between $150,000 and $170,000 ($225,000 and $245,000 for married taxpayers filing jointly).

In addition, the WHBAA disqualifies residential purchases in excess of $800,000 from qualifying for the credit. The act limits the credit to taxpayers who are at least 18 years old (or married to a spouse who is at least 1 8 years old) at the time of the purchase of an eligible personal residence. It also provides that taxpayers who purchase a qualifying principal residence after December 31, 2008, may elect to treat the purchase as being made on December 31 of the preceding year for purposes of claiming the credit.

In order to claim the credit, taxpayers must attach to their return a copy of the closing statement for the personal residence purchased. In addition, the WHBAA extends the dates for certain individuals who are on qualified official extended duty service outside of the United States to enter into a written binding contract for the purchase of their personal residence before May 1, 201 1, and close before July 1, 201 1. For the purposes of the credit, the WHBAA defines a taxpayer who is on qualified official extended duty service as -

* a member of the uniformed services,

* a member of the U. …

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