Extension & Expansion of Homebuyer Credit
The Senate appears to be moving closer to passing a bill to extend and expand the homeowners credit to purchase a home. This credit was designed to help stimulate the housing market and I know in our area (which tends to have moderate to lower priced homes) that this credit is probably responsible for most of the home sales that have occurred in the last few months.
Homebuyer Credit Provisions– The extension would make the credit good for purchase of sales that have a binding contract by May 1, 2010 and close by July 1, 2010. The credit is equal to 10% of the house cost or $8,000, whichever is less. The credit starts to phase out for those taxpayers earning $225,000 and is completely phased out at $245,000 (for married couples). Those who bought in 2008 are required to pay the credit back over time, while purchases made in 2009 and 2010 and for the taxpayer to keep as long as they keep the home for three years or more. If the taxpayers buy a house costing more than $800,000, the credit is not allowed.
The Senate has also decided that the American public who already own a home should get in on the fun also. If you are a long-time homeowner (five of the last five years). then you are now eligible for the credit, however, it is reduced to $6,500.
These provisions are estimated to cost the rest of us that do not purchase a new home about $10 billion in 2010.
Net Operating Loss Carrybacks– The Senate bill is also expanding the extended carryback periods for business with net operating losses that was allowed for 2008 into 2009. This means that if you have a business with sales less than $15,000,000, then you can elect to carryback a loss for up to five years instead of the old two year rule. This provision will also cost about $10 billion.
Nasty S corporation and partnership penalty provision – As a way to make up for part of this tax rebate, the Senate wants to more than double the penalty for filing late a partnership or S corporation income tax return. The current penalty is less than $100 per partner or shareholder per month. They want to increase this to about $200 per month instead.
With the recent change in partnership extensions being September 15 instead of October 15, they may catch a lot of farmers in the pocketbook next year. I have already written multiple letters asking for abatement of penalties this year due to this change.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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