More Accommodating Income Requirements: The tax credit was designed to phase out based on income levels, meaning the amount of the tax credit decreases as the filer's income approaches the maximum limit. Under the previous format, income restrictions called for the tax credit to begin to phasing out for individuals making $75,000 annually, (modified adjusted gross income*), with no credit available to individuals making $95,000 or more. For married couples filing jointly, this "phasing out" range was $150,000 - $170,000 under the previous law. The income limits set within the new law are far more liberal. For single filers, the credits now begin phasing out at $125,000 up to $145,000 of modified adjusted gross income. For married couples filing jointly, the range begins at $225,000 and ends at $245,000.
The existing phase-out ranges of $75,000 to $95,000 or $150,000 to $170,000 for joint filers still apply to purchases on or before Nov. 6, 2009.
(*For most people, modified adjusted gross income will be the same as adjusted gross income.)
Anti-Abuse Measures : The new law contains anti-abuse measures designed to address and prevent fraudulent applications for the home-buyer tax credit. Persons who are under the age of 18 or who are claimed as dependants by other taxpayers will not be qualified for the tax credit program. Taxpayers taking the credit will also have to furnish proof of purchase. After filling out IRS Form 5405 to determine their tax credit amount, buyers must attach a copy of their HUD-1 settlement form (i.e. closing statement) as proof of the completed home purchase.
Additional Limitations on Buyer-Seller Relationship: Under the previous law, buyers were not eligible for the tax credit when purchasing a home from a lineal ancestor or descendent. The new law applying to purchases made after Nov. 6 also prohibits buyers from taking the credit if the home is purchased from a spouse or the spouse's lineal relatives.