New and extended tax breaks help homebuyers

By Philip J. Curtis

Curtis and Curtis PC

On November 6, as part of the extension of unemployment benefits, President Obama signed into law a wide ranging bill that includes provisions to extend and expand the homebuyers' tax credit and also expands a stimulus law provision that will help businesses struggling in the down economy.

The bill extends the $8,000 tax credit for first-time homebuyers that was set to expire on November 30, 2009.

Now, a purchase contract must be in place before May 1, 2010 on a primary residence priced up to $800,000.

The bill also raises the income limits to $125,000 for singles and $225,000 for couples, before the credits begin to phase out. The previous limits were $75,000 and $150,000, respectively.

A new tax credit was also created for up to $6,500 for existing homeowners who buy a primary residence if they have lived in their current home for at least five (5) of the last eight (8) years.

The previous tax credit only applied to what Congress defined as first-time homebuyers.

A tax break included in the $787 billion stimulus package in February that was previously limited to small businesses was expanded to include all businesses.

This expansion allows struggling businesses to deduct losses for 2008 and 2009 from profits in the five (5) previous profitable years before 2008.

Under current law, the so-called net-operating loss carryback is only allowed for two (2) years. This will allow applicable businesses to obtain refunds for taxes paid for those five (5) years.

The original law only allowed losses in 2008 to be applied. There are two major restrictions: (1) any refunds for taxes in the fifth year will be reduced by 50 percent; and (2) any company that received TARP money would be ineligible.

This article is intended to provide basic information about these new and expanded tax incentives. To learn more or to get a better understanding of the new law in its entirety, you should contact your tax professional.

Philip J. Curtis is the managing attorney of Curtis and Curtis, P.C., a full service law firm in Jackson, Michigan.

Curtis represents and counsels many family-owned and closely-held companies in Jackson and throughout mid-Michigan in regards to business and real estate transactions, business succession and tax planning, employee benefits and employment law.

Published: Wed, Nov 18, 2009

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