New law addresses net operating losses, home buyer tax credits

November 09, 2009

On November 6, President Obama signed into law a bill affecting net operating loss (NOL) rules and home buyer tax credits.

The legislation permits businesses to carry back for up to five years losses incurred in 2008 or 2009. (Generally, NOLs may be carried back two years and forward 20 years.) An NOL carried back to the fifth tax year before the loss year cannot exceed 50% of the taxpayer's taxable income for that year.

The legislation also extends the $8,000 first-time home buyer tax credit through April 30, 2010, and creates a new tax credit of up to $6,500 for those who have owned a principal residence for five of the past eight years and are purchasing a different principal residence. Income limitations for these credits are increased to $125,000 for individuals and $225,000 for joint filers.

If you would like more information on the content of this alert, please contact Christine Burke Worthen, a shareholder and Chair of Eaton Peabody's Tax Practice Group, or Rodney A. Lake.

This alert is provided as general information, and is not a substitute for legal or other professional advice.