Changes to the Homebuyer Credit

Amendments offer credits to both new and existing homebuyers
by Jennifer L. Harrison

Congress recently extended and amended the home buyer credit. Initially, the home buyer credit was available only to first-time home buyers. The new bill allows existing homeowners to obtain a credit for home purchases if certain criteria are met, raises the amount of the credit, and raises the income limitations for claiming the credit. The new bill is summarized below for new home buyers and existing homebuyers.
New Home Buyers
  • Home must be purchased between January 1, 2009 and April 30, 2010. If a binding contract is signed by April 30, 2010, a purchase completed by June 30, 2010 is eligible as well.
  • If the home is purchased after November 6, 2009, the income limits are $125,000 for single taxpayers and $225,000 for married taxpayers (was originally $75,000 and $150,000). Therefore, if your income is over the threshold, your credit will be reduced, and ultimately eliminated for income over $145,000 and $245,000.
  • The buyer cannot have owned a home within the past 3 years; the IRS tests spouse ownership too.
  • The credit is equal to 10% of purchase price, up to $8,000.
  • Homes priced over $800,000 do not qualify.
  • Home cannot be purchased from a family member (parents, child, etc).
  • The credit is refundable and can be claimed even if there is no tax liability.
  • Taxpayers can choose the year to claim credit if income is high in one year.

Existing Home Buyers

  • Existing buyers have the same time and income limitations for purchasing a home and claiming credit as new home buyers.
  • The taxpayer must have lived in the same home for 5 consecutive years during the past 8 years; the law tests ownership and residency of spouses.
  • The new home does not have to be an upgrade. It can be a home of equal or lesser value than the current home.
  • The credit is equal to 10% of purchase price, up to $6,500.
  • Homes over $800,000 do not qualify for the credit.
  • The credit is refundable.
  • The home cannot be purchased from family members.

Many people will potentially benefit from the new bill. Please contact your HLB Gross Collins, P.C. advisor if you would like more information regarding the home buyer credit and to see if you can take advantage of this credit.

Our Changing Tax Laws

Many tax changes enacted and some still pending

Enacted Tax Legislation
 The year 2009 was certainly another active year for tax law changes. One that will impact nearly all Americans who use a tax preparer is the requirement for mandatory e-filing of individual, estate or trust returns filed after December 31, 2010 if the return is prepared by a tax preparer that prepares more than 10 returns.  Some of the other federal changes include:

  • An enhanced 5 year net operating loss carryback for NOLs incurred in 2008 or 2009.
  • Extension of the homebuyer’s credit to April 30, 2010 and the addition of a credit for long-time residents.
  • For tax years beginning after December 31, 2009, the penalty for failure to file a partnership or S corp return increases from $89 to $195 per K-1.
  • Beginning in 2011, every federal, state and local government will be required to withhold tax at a rate of three percent on certain payments to persons providing any property or services (unless such payments are already subject to withholdings under other provisions).
  • Eligible businesses will be able to recognize cancellation of certain indebtedness over five years beginning in 2014. This treatment applies to specified types of business debt repurchased or forgiven by the business after December 31, 2008 and before January 1, 2011.
  • The Hope Credit has been renamed the American Opportunity Education Credit and has been enhanced for the years 2009 and 2010. The new law also raises the maximum credit, extends it over four years of post-secondary school education, and makes 40 percent of the credit refundable.
  • Beneficiaries of 529 plans  are permitted to use tax-free distributions to pay for computers and computer technology during 2009 and 2010.
  • The residential energy credit has been reinstated for 2009 and 2010.
  • Generally, an investor other than an entity doing business as a C corporation may exclude 50 percent of the gain from the sale or exchange of “qualified small business stock.
  • The 50 percent exclusion has been raised to 75 percent. However, the increase is temporary and applies to stock acquired after the date of enactment and before January 1, 2011. Holding period rules also apply.
  • Producers of alternative and renewable energy are definite winners with the enactment of temporary incentives.

Pending Tax Legislation
The Tax Extenders Act of 2009 passed the House but had not yet passed the Senate as of this writing. The bill would extend through 2010 numerous provisions set to expire at the end of 2009. Bonus depreciation and enhanced Section 179 expensing on equipment purchases expired at the end of 2009. The President has proposed another year’s extension of these two items.

Expiration of the Bush Tax Cuts   –  
In 2011, the Bush tax cuts are set to expire. Some of the provisions may be extended and others may not. It is anticipated that the top two income tax rates, currently 33% and 35%, will be allowed in 2011 to increase to the old rates in effect prior to the enactment of the legislation (36% and 39.6%). The existing tax code calls for no estate tax whatsoever for one year, 2010, but then reinstates it starting in 2011 with pre-2001 rates that are much higher than those now in effect. A bill that passed the House would make permanent the estate, gift and generation-skipping transfer tax law in effect for 2009. It is unknown whether this would be effective for 2010 or 2011.

HLB Gross Collins, P.C. Adds New Team Members

HLB Gross Collins, P.C.,  has added AJ Nezamabadi, Ronica Brown, Michael Klug, Adil Amou, Stephanie Autry, Michelle Duncan, Jennifer Lain and Stephan Strothenke to the firm.

AJ Nezamabadi, who will serve as an accountant, previously held an internship at HLB Gross Collins, P.C.  He holds a bachelor of business administration degree in accounting from Kennesaw State University.

Ronica Brown is a an honor graduate of Kennesaw State University where she earned a degree in accounting and International affairs. She is currently pursuing a Master’s degree in accounting, with a concentration in taxation.  She is also a member of Beta Gamma Sigma Honor Society.

Michael Klug holds a bachelor of business administration in accounting from the University of Georgia and a Masters of Tax from Georgia State University.

Adil Amou, Stephanie Autry, Jennifer Lain and Michelle Duncan are our new interns.  Amou will serve on the firm’s audit team and graduated in December 2009 with a bachelor of accounting and bachelor of finance degree from Kennesaw StateUniversity.  Autry will serve the firm’s audit team and will graduate in May 2011 from Kennesaw State University with a Masters of Accountancy.  Lain will serve the firm’s audit team.  She is pursuing an accounting degree from Kennesaw StateUniversity.  Duncan is serving a second internship with our Tax team.  She is pursuing her Masters of Accountancy at theUniversity of Alabama.

HLBGC implements iLumen platform adding value to clients

HLB Gross Collins, P.C. is pleased to announce the implementation of the iLumen platform. This will allow clients to upload monthly financials through iLumen’s secure Portfolio Connection.

Portfolio Connection will put client analytics, advisory tools and portfolio queries directly on the desktop and allow HLB Gross Collins, P.C. to better serve clients. iLumen will allow HLB Gross Collins, P.C. to prepare select benchmarking reports, perform cash flow analysis, and analyze key performance indicators ranging from liquidity ratios to growth and performance metrics.


IRS Mileage Rates Decrease for 2010

Beginning January 1, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 50 cents per mile for business miles driven
  • 16.5 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

The new rates are slightly lower than last year’s rates to reflect generally lower transportation costs than last year.

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