US Congress Approves Tax Breaks For Homebuyers And Businesses

by Mike Godfrey, Tax-News.com, Washington

09 November 2009

The US House of Representatives has expanded loss carry back provisions and extended the homebuyer tax credit after approving the Worker, Homeownership and Business Assistance Act of 2009 on November 5.

The legislation will allow businesses of all sizes to use net operating losses from 2008 or 2009 to offset profits from five previous years, up from the normal carry back period of 2 years.

However, business would only be able to offset 50% of their income in the fifth year of carryback, although the Act allows small businesses which have already elected to carry back 2008 losses under the American Recovery and Reinvestment Act to elect to carry back losses from 2009.

The Act also extends the USD8,000 homebuyer tax credit to first-time homebuyers with a binding contract before April 30, 2010, allowing 60 days to close. Under the current law, this tax credit is due to expire on November 30, 2009.

The legislation additionally expands the tax credit's coverage by increasing the phase-out threshold for individuals to income above USD125,000, and for joint filers to income about USD225,000. Current law stipulates that the credit phases out for individuals with income starting at USD75,000 and for joint filers with income starting at USD150,000.

The legislation makes available a USD6,500 credit to homebuyers who have been in their current residence for five or more consecutive years out of the last eight years. In addition, for military personnel there is an extended tax credit deadline of April 31, 2011, and more relaxed tax credit repayment terms.

The homebuyer tax credit is available for the purchase of principal residences with a purchase price of up to USD800,000.

Unemployment insurance for workers in every state will be extended by 14 weeks under the legislation, and for 20 weeks in states with an unemployment rate of more than 8.5%. This provision is paid for by an extension of the Federal Unemployment Tax Act (FUTA), which costs employers USD14 per year per employee, through June 30, 2011.

The proposals were approved by a strong bipartisan majority of 403 to 12, and President Obama was due to sign the bill on the afternoon of November 6.

Charles Rangel, Chairman of the House Ways and Means Committee, commented that: "I am pleased that Congress has united behind this vital assistance to families and businesses and I look forward to President Obama’s signature so this important bill can become law."

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