On November 6, 2009, President Obama signed into law the Worker, Homeownership, and Business Assistance Act of 2009. The new law liberalizes and extends the first-time homebuyer credit, amends and extends the rules for five-year net operating loss carrybacks, increases the penalties on S corporations and partnerships for failure to file returns, and mandates electronic filing for certain tax return preparers.

First time homebuyers:  The $8,000 credit is extended for purchases made before May 1, 2010. For this purpose, a first-time homebuyer is a taxpayer (and, if married, the spouse of the taxpayer) who has not owned a principal residence at any time during the previous three years.

For qualifying taxpayers, the credit also applies to purchases before July 1, 2010, provided the taxpayer has entered into a written binding contract to close on the purchase before May 1, 2010. Effectively, this provision allows taxpayers an additional two months to close.

Existing Homeowners:  A taxpayer is eligible for a credit up to $6,500 ($3,250 if separate returns are filed) provided the taxpayer (and if married, the taxpayer’s spouse) has owned the same principal residence for any five consecutive years during the eight-year period ending on the date of purchase.

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