Code Section 36
| Code Section | Effective Date | Name of Act | Name of Provision | 10yr Revenue Estimate ($millions) |
|---|---|---|---|---|
| 36 | 6/30/2010 | The Homebuyer Assistance and Improvement Act of 2010 1112 | Homebuyer Credit | -140 |
| 36 | *See Notes Below | The Worker, Home Ownership, and Business Act of 2009 (PUBLIC LAW 111–92) 297 | Extension and Modification of First-Time Homebuyer Credit | -10,823 |
| 36 | 12/31/2008 | The American Recovery and Reinvestment Act of 2009 (Public Law 111-5) | Modifications to homebuyer credit | -6,638 |
* Notes on Effective Date
The extension of the first-time homebuyer credit and coordination with the first-time homebuyer credit for the District of Columbia apply to residences purchased after November 30, 2009.
Provisions relating to long-time residents of the same principal residence, and income, purchase price, age, related party, dependent, and documentation limitations apply for purchases after the date of enactment.
The waiver of recapture provision applies to dispositions and cessations after December 31, 2008.
The expansion of mathematical and clerical error authority applies to returns for taxable years ending on or after April 9, 2008.
Homebuyer Credit
Explanation of Provision
The Act extends the time for closing on a principal residence eligible for the first-time homebuyer credit through September 30, 2010 for any individual who entered into a written binding contract before May 1, 2010, to close on the purchase of a principal residence before July 1, 2010. The eligibility period for an individual who serves on qualified official extended duty outside of the United States who enters into a written binding contract before May 1, 2011, to close on the purchase of a principal residence before July 1, 2011, and who purchases such residence before July 1, 2011, is unchanged.
Extension and Modification of First-Time Homebuyer Credit
Explanation of Provision301
- Extension of application period
- Long-time residents of the same principal residence
- Limitations
- Waiver of recapture for individuals on qualified official extended duty
- Extension of the first-time homebuyer credit for individuals on qualified official extended duty outside of the United States
- Mathematical error authority
1. Extension of application period
In general, the credit is extended to apply to a principal residence purchased by the taxpayer before May 1, 2010. The credit applies to the purchase of a principal residence before July 1, 2010 by any taxpayer who enters into a written binding contract before May 1, 2010, to close on the purchase of a principal residence before July 1, 2010.
The waiver of recapture, except in the case of disposition of the home (or the home otherwise ceases to be the principal residence of the taxpayer) within 36 months from the date of purchase, is extended to any purchase of a principal residence after December 31, 2008.
The election to treat a purchase as occurring in a prior year is modified. In the case of a purchase of a principal residence after December 31, 2008, a taxpayer may elect to treat the purchase as made on December 31 of the calendar year preceding the purchase for purposes of claiming the credit on the prior year’s tax return. No District of Columbia first-time homebuyer credit is allowed to any taxpayer with respect to the purchase of a residence after December 31, 2008, if the national first-time homebuyer credit is allowable to such taxpayer (or the taxpayer’s spouse) with respect to such purchase.
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2. Long-time residents of the same principal residence
An individual (and, if married, the individual’s spouse) who has maintained the same principal residence for any five-consecutive year period during the eight-year period ending on the date of the purchase of a subsequent principal residence is treated as a first time homebuyer. The maximum allowable credit for such taxpayers is $6,500 ($3,250 for a married individual filing separately).
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3. Limitations
The Act raises the income limitations to qualify for the credit. The credit phases out for individual taxpayers with modified adjusted gross income between $125,000 and $145,000 ($225,000 and $245,000 for joint filers) for the year of purchase.
No credit is allowed for the purchase of any residence if the purchase price exceeds $800,000.
No credit is allowed unless the taxpayer is 18 years of age as of the date of purchase. A taxpayer who is married is treated as meeting the age requirement if the taxpayer or the taxpayer’s spouse meets the age requirement.
The definition of purchase excludes property acquired from a person related to the person acquiring such property or the spouse of the person acquiring the property, if married.
No credit is allowed to any taxpayer if the taxpayer is a dependent of another taxpayer.
No credit is allowed unless the taxpayer attaches to the relevant tax return a properly executed copy of the settlement statement used to complete the purchase.
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4. Waiver of recapture for individuals on qualified official extended duty
In the case of a disposition of principal residence by an individual (or a cessation of use of the residence that otherwise would cause recapture) after December 31, 2008, in connection with Government orders received by the individual (or the individual’s spouse) for qualified official extended duty service, no recapture applies by reason of the disposition of the residence,303 and any 15-year recapture with respect to a home acquired before January 1, 2009, ceases to apply in the taxable year the disposition occurs.
Qualified official extended duty service means service on official extended duty as a member of the uniformed services, a member of the Foreign Service of the United States, or an employee of the intelligence community.304
Qualified official extended duty is any period of extended duty while serving at a place of duty at least 50 miles away from the taxpayer’s principal residence or under orders compelling residence in government furnished quarters. Extended duty is defined as any period of duty pursuant to a call or order to such duty for a period in excess of 90 days or for an indefinite period.
The uniformed services include: (1) the Armed Forces (the Army, Navy, Air Force, Marine Corps, and Coast Guard); (2) the commissioned corps of the National Oceanic and Atmospheric Administration; and (3) the commissioned corps of the Public Health Service.
The term ‘‘member of the Foreign Service of the United States’’ includes: (1) chiefs of mission; (2) ambassadors at large; (3) members of the Senior Foreign Service; (4) Foreign Service officers; and (5) Foreign Service personnel.
The term ‘‘employee of the intelligence community’’ means an employee of the Office of the Director of National Intelligence, the Central Intelligence Agency, the National Security Agency, the Defense Intelligence Agency, the National Geospatial-Intelligence Agency, or the National Reconnaissance Office. The term also includes employment with: (1) any other office within the Department of Defense for the collection of specialized national intelligence through reconnaissance programs; (2) any of the intelligence elements of the Army, the Navy, the Air Force, the Marine Corps, the Federal Bureau of Investigation, the Department of the Treasury, the Department of Energy, and the Coast Guard; (3) the Bureau of Intelligence and Research of the Department of State; and (4) the elements of the Department of Homeland Security concerned with the analyses of foreign intelligence information.
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5. Extension of the first-time homebuyer credit for individuals on qualified official extended duty outside of the United States
In the case of any individual (and, if married, the individual’s spouse) who serves on qualified official extended duty service outside of the United States for at least 90 days during the period beginning after December 31, 2008, and ending before May 1, 2010, the expiration date of the first-time homebuyer credit is extended for one year, through May 1, 2011 (July 1, 2011, in the case of an individual who enters into a written binding contract before May 1, 2011, to close on the purchase of a principal residence before July 1, 2011).
6. Mathematical error authority
The Act makes a number of changes to expand the definition of mathematical or clerical error for purposes of administration of the credit by the Internal Revenue Service (‘‘IRS’’). The IRS may assess additional tax without issuance of a notice of deficiency as otherwise required 305 in the case of: an omission of any increase in tax required by the recapture provisions of the credit; information from the person issuing the taxpayer identification number of the taxpayer that indicates that the taxpayer does not meet the age requirement of the credit; information provided to the Secretary by the taxpayer on an income tax return for at least one of the two preceding taxable years that is inconsistent with eligibility for such credit; or, failure to attach to the return a properly executed copy of the settlement statement used to complete the purchase.
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Modifications to homebuyer credit
Explanation of Provision1
The Act extends the existing homebuyer credit for qualifying home purchases before December 1, 2009. In addition, it increases the maximum credit amount to $8,000 ($4,000 for a married individual filing separately) and waives the recapture of the credit for qualifying home purchases after December 31, 2008 and before December 1, 2009. This waiver of recapture applies without regard to whether the taxpayer elects to treat the purchase in 2009 as occurring on December 31, 2008. If the taxpayer disposes of the home or the home otherwise ceases to be the principal residence of the taxpayer within 36 months from the date of purchase, the present law rules for recapture of the credit will apply.The Act modifies the coordination with the first-time homebuyer credit for residents of the District of Columbia under section 1400C. No credit under section 1400C shall be allowed to any taxpayer with respect to the purchase of a residence during 2009 if a credit under section 36 is allowable to such taxpayer (or the taxpayer’s spouse) with respect to such purchase. Taxpayers thus qualify for the more generous national first-time homebuyer credit rather than the D.C. homebuyer credit for qualifying purchases in 2009. No credit under section 36 is allowed for a taxpayer who claimed the D.C. homebuyer credit in any prior taxable year.The Act removes the prohibition on claiming the credit if the residence is financed by the proceeds of a mortgage revenue bond, a qualified mortgage issue the interest on which is exempt from tax under section 103.
1- This provision was subsequently amended by sections 11 and 12 of the Worker, Homeownership, and Business Assistance Act of 2009, Pub. L. No. 111–92, described in Part Five, and by section 2 of the Homebuyer Assistance and Improvement Act of 2010, Pub. L. No. 111–98, described in Part Ten of this document.
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301- This provision was subsequently amended by section 2 of the Homebuyer Assistance and Improvement Act of 2010, Pub. L. No. 111–98, described in Part Ten of this document.
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303- If the individual sells the home (or the home ceases to be used as the principal residence of the individual and the individual’s spouse) in connection with such orders in the same taxable year the home is purchased, the credit is allowable.
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304- These terms have the same meaning as under the provision for exclusion of gain on the sale of certain principal residences (Sec. 121).
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305- Sec. 6213.
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1112- H.R. 5623. The bill passed the House on the suspension calendar on June 29, 2010. The Senate passed the bill by unanimous consent on June 30, 2010. The President signed the bill on July 2, 2010.
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