New legislation extends and expands homebuyer, unemployment and business benefits

The Worker, Homeownership and Business Assistance Act of 2009 was approved by the president on Nov. 6, providing an extension for unemployment benefits and the first-time homebuyer tax credit. The Act also includes a new tax credit for existing homeowners who are purchasing their next home and expands the ability of businesses to use net operating losses (NOLs). These steps are intended to help further bolster our economy.

Act quickly: Tax credit for homebuyers ends April 30, 2010

This popular tax credit was set to expire Dec. 1, 2009, but is now extended for purchases through April 30, 2010. This means first-time homebuyers can continue to receive up to an $8,000 credit for the purchase of a home. Here are some of the additional changes that apply for home purchases after Nov. 6, 2009:

• Time to close extended: Purchasers under a binding contract by the April 30 deadline will have until June 30, 2010 to close.
• Income cap increased: Individuals with a modified adjusted gross income (MAGI) of up to $125,000 are now eligible for the maximum allowable credit (phases out completely at $145,000) while married couples filing jointly with MAGI up to $225,000 are eligible for the maximum allowable credit (phases out completely at $245,000).
• Home price limit established: Although homebuyers could receive the credit on any home purchase price originally, the modified credit is only available on homes up to $800,000.
• Eligibility restrictions added: No credit will be allowed for individuals/couples under age 18 or for taxpayers who can be claimed as dependents. See your tax advisor for complete details.

According to the IRS, the first-time homebuyer tax credit has benefitted about 1.4 million families to date. With its extension and expansion, even more people are expected to qualify.

Tax credit for homebuyers extended to existing homeowners

Previously, the homebuyer tax credit only benefitted first-time homebuyers. Now it has been expanded to also include existing homeowners who have lived in their current residence for at least five consecutive years in the eight-year period prior to purchase. These homeowners can receive up to a $6,500 tax credit on the purchase of a new or existing home. All other eligibility requirements are the same as those for the first-time homebuyer tax credit.

Unemployment benefits extended for up to 20 weeks

Out-of-work Americans in all 50 states are now eligible for 14 additional weeks of unemployment insurance benefits, and up to 20 additional weeks in states where unemployment levels are above 8.5%.

The continuation of this assistance will help nearly two million jobless Americans whose benefits would otherwise expire by the end of the year. This extended term will be the new standard for benefits until June 30, 2011.

These changes are especially timely considering the latest Department of Labor report, just released Nov. 6, shows unemployment rates have reached 10.2% — the highest rate since 1983.

Provision to help businesses offset losses expanded

Prior law generally allowed a net operating loss (NOL) from the current tax year to be carried back two years and/or carried forward 20 years. A more flexible NOL carryback provision was introduced under the American Recovery and Reinvestment Act (ARRA) of 2009. It gave eligible small businesses (those with average annual gross receipts of $15 million or less) an election to carry back a 2008 NOL for three, four or five tax years instead of just two years under previous law.

This latest legislation expands this carryback provision to include most businesses. In addition, it allows businesses to apply the NOL carryback rule to losses from either 2008 or 2009, which could result in a refund for taxes already paid. Eligible small businesses can carry back NOLs for both 2008 and 2009 if they made (or will make) the carryback election for 2008 under ARRA.

Whether you are buying a home, experiencing unemployment or looking for ways to help your business thrive in these challenging times, your Ameriprise financial advisor can help you navigate this legislation and determine which opportunities are right for you.