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IRS Decides to Be Generous with Credit for New Homebuyers, CCH Says
(RIVERWOODS, ILL. March 2, 2009) – The IRS has decided to be generous with its interpretation of the expanded new homebuyer’s credit enacted as part of the stimulus bill, The American Recovery and Reinvestment Act of 2009, according to CCH, a Wolters Kluwer business and a leading provider of tax, accounting and audit information, software and services (CCHGroup.com). People who qualify for the credit and who buy a new home this year before December 1 will be able to knock as much as $8,000 off their 2008 taxes if they choose.
The credit for new homebuyers first came to life last year, providing a credit of 10 percent of the purchase price of a home, up to $7,500, for purchases made between April 9, 2008 and June 30, 2009. The law allowed anyone purchasing a home in 2009 the option of treating the purchase as having taken place on December 31, 2008, thus permitting them to use the credit to reduce either their 2008 or 2009 taxes.
“One important restriction on this credit was that it was really a no-interest loan,” said Mark Luscombe, JD, LLM, CPA and CCH principal federal tax analyst. “You could use it to reduce your taxes now, but you had to repay it on your income tax over 15 years, beginning two years after the purchase.”
Stimulus Bill Liberalized Credit
The stimulus bill liberalized the credit in several ways, extending the cutoff date for qualifying purchases to November 30, 2009, increasing the maximum credit amount to $8,000 and, most significantly, eliminating the repayment requirement as long as the purchaser stayed in the home for at least three years.
“The one oddity in the way the law was written had to do with the provision that you could count a 2009 purchase as having taken place in 2008,” Luscombe said. “Under a strict reading on the law, if you did that, you still didn’t have to repay the credit and you could take it against your 2008 taxes, but it seemed the maximum allowable credit would be reduced to the old, $7,500 amount.”
Now, an IRS Notice has announced that the Service will allow the new, $8,000 amount to be used even when a 2009 purchase is treated as having taken place in 2008.
“This doesn’t help people who actually bought homes in the 2008 qualifying period, and who are limited to a $7,500 credit that must be repaid, but it looks as though only further legislation can help them,” Luscombe said.
About CCH, a Wolters Kluwer business
CCH, a Wolters Kluwer business (CCHGroup.com) is a leading provider of tax, accounting and audit information, software and services. It has served tax, accounting and business professionals since 1913. Among its market-leading products are The ProSystem fx® Office, CCH® TeamMate, CorpSystem®, CCH® Tax Research NetWork™, Accounting Research Manager® and the U.S. Master Tax Guide®. CCH is based in Riverwoods, Ill.
Wolters Kluwer is a leading global information services and publishing company. The company provides products and services for professionals in the health, tax, accounting, corporate, financial services, legal, and regulatory sectors. Wolters Kluwer had 2008 annual revenues of €3.4 billion, employs approximately 20,000 people worldwide, and maintains operations in over 35 countries across Europe, North America, Asia Pacific, and Latin America. Wolters Kluwer is headquartered in Amsterdam, the Netherlands. Its shares are quoted on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Visit www.wolterskluwer.com for information about our market positions, customers, brands, and organization.