New law expands benefits for taxpayers

The new Worker, Homeownership, and Business Assistance Act of 2009 contains several key provisions affecting individuals and business owners. Here\’s a brief summary.

Homebuyer’s credit

Under prior law, an eligible first-time homebuyer could claim a maximum credit of $8,000 for a principal residence purchased before December 1, 2009. But the credit began to phase out for single filers with a modified adjusted gross income (MAGI) above $75,000 and joint filers above $150,000.

Under the new law, the credit is available for home purchases made before May 1, 2010, (July 1, 2010, if a binding contract exists before May 1). Also, the phase-out threshold increases to $125,000 of MAGI for single filers and $225,000 for joint filers. The homebuyer credit may be elected on a 2009 tax return for a qualified purchase in 2010.

Not just for first-timers: If you buy a home after November 6, 2009, and have owned and used the previous home as your principal residence for five consecutive years in the last eight years, you may claim a credit of up to $6,500. New limit for everyone: No credit is allowed for purchases after November 6, 2009, if the price exceeds $800,000.

NOL carryback

Normally, a business can carry back a net operating loss (NOL) for only two years before carrying it forward for up to 20 years. A prior law change allowed a carryback for three, four, or five years to qualified small business for NOLs in tax years beginning or ending in 2008.

The new law extends the longer carryback regardless of the size of the business. This election is generally available for NOLs incurred in either 2008 or 2009.

Caveat: Under the new law, an NOL carried back to the fifth year is limited to 50% of the taxable income for the year. Any remaining NOL may offset income in the remaining four years.

Other provisions

Unemployment benefits are extended for up to 14 weeks (20 weeks for individuals in states with high unemployment rates). But the tax exclusion for the first $2,400 of unemployment benefits received in 2009 isn’t extended.

Finally, the new law includes several revenue-raisers to pay for the favorable changes, such as expanded use of e-filing by small tax return preparers, an extension of the FUTA surtax, and increased penalties for failing to file partnership and S corporation returns.

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