I'm fielding a lot of questions about the homebuyer tax credit for repeat buyers and thought it worthwhile to answer individual questions as they come up. My last post in this "series" was to cover the question that you don't need to sell your home to qualify for the repeat homebuyer tax credit.
The question I got asked today was what the phase out range is on income limits for repeat homebuyers. I should mention that when it comes to income, the rules are same for First Time Homebuyers and Repeat Buyers.
First of all, it is the MAGI (Modified Adjusted Gross Income) that is taken into account. To determine your MAGI, you first need to know what your AGI, (Adjusted Gross Income) is. Your AGI is the total amount you earn in a year, minus certain deductions that are considered adjustments. It's the amount calculated on your tax return BEFORE your itemized deductions. The MAGI is the addition of income from a few other less common sources. For examples of those sources please see the instructions on the form 5405 that is used for filing for the tax credit. (Please note that the link is to the current form, I'll change the link here when they revise the form for the extended homebuyer credit).
So now to answer the question on the phase out range: There is a $20,000 phase out range. The following info comes directly from the IRS site and shows you exactly what the income limits and phase out range are. It's worth mentioning that these new limits apply to all closings after November 6, 2009 when the Bill was signed. If you were under contract before November 6 and at that time didn't qualify under the previous income limits, then you may be in luck now with the new income limits.
For purchases after Nov. 6, 2009, for a married couple filing a joint return, the phase-out range is $225,000 to $245,000. For other taxpayers, the phase-out range is $125,000 to $145,000. This means that the full credit is available for married couples filing a joint return whose MAGI is $225,000 or less and for other taxpayers whose MAGI is $125,000 or less. (11/19/09)
For more extensive info about the extended and expanded Homebuyer tax credit you may want to check out these FAQ's
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As quoted in the New York Times "A Little-Known Loan Program", and in the Hartford Courant "Moving In:Couple Combining Households Buys In Newington" and "Moving In... New Britain"