We have received several questions lately surrounding the extension and expansion of the First Time Homebuyer Tax Credit. As I research and answer, I'll also post here.
Q: The buyer is a single taxpayer making $130,000 a year, $10,000 of which is his employer's contribution to the buyer's 401(k). Assuming he qualifies in all other respects and has no other income than mentioned above, does he qualify for the tax credit?
A: Yes. The new income limit is $125,000 for a single taxpayer (increased from $75,000). The definition of "income" for the purposes of this tax credit is Modified Adjusted Gross Income. While the $10,000 in employer contributions is technically income, it is not included in the IRS definition of Modified Adjusted Gross Income and therefore the buyer qualifies with $120,000 in "income."
Tomorrow we'll discuss whether a buyer must sell their current house to be eligible for the $6,500 existing homeowner tax credit. Stay tuned!
Sources: here and here
Note: Please consult with a CPA before making any decisions. These posts are meant to provide the real estate community with a broad understanding of real estate topics and are not to be relied upon as legal or accounting advice.