It's official. The home buyer tax credit has been extended. Breathe in breathe out you now have until April 30, 2010 to get a purchase contract executed and qualify for the $8000 first time home buyer tax credit. If you're already a homeowner and planning to buy up or downsize, you may qualify for the new $6500 tax credit. In either case, your escrow must close no later than June 30, 2010. Since Congress did'nt stretch this out for all of 2010, I would'nt plan on another extension. So let's take a look at the highlights of the revised and expanded home buyer tax credit.

First Time Home Buyer Tax Credit

The $8000 tax credit is for first-time home buyers only.  For the tax credit program, the IRS defines a first time home buyer as someone who has not owned a principal residence during the three years prior to the purchase. So if you have owned a home previously but no longer do and at least three years has past, you could be eligible for the FTHB tax credit. 

The tax credit does not have to be repaid unless the home is sold or ceases to be used as the buyers principal residence within three years after the initial purchase. 

The tax credit is equal to 10 percent of the homes purchase price up to a maximum of $8000.

The tax credit applies only to homes priced at $800,000 or less.

The tax credit now applies to sales occurring between January 1, 2009 and April 30, 2010.  Any sales contract signed by April 30, 2010 must close escrow by June 30, 2010 to qualify.  

For homes purchased between January 1, 2009 and November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly.  

For homes purchased between November 7, 2009 and on or before April 30, 2010, the income limits to qualify for the full tax credit increased to $125,000 for singles and $225,000 for married couples. 

Home purchase must be for principal residences of any kind of home - new or resale - condo, single family, town home, mobile home - are eligible for the tax credit.



          $6500 Move-Up/Repeat Home Buyer Tax Credit

To be eligible to claim the tax credit, buyers must have owned and lived in their previous home for five consecutive years out of the last eight years. 

The tax credit does not have to be repaid unless the home is sold or ceases to be used as the buyers principal residence within three years after the initial purchase.

The tax credit is equal to 10 percent of the homes purchase price up to a maximum of $6500.

The tax applies only to homes priced at $800,000 or less.

The credit is available for homes purchased between November 7, 2009 and April 30, 2010.  All purchase contracts executed by April 30, 2010 must close escrow by June 30, 2010 to qualify.  

Single taxpayers with incomes up to $125,000 an married couples with incomes up to $225,000 qualify for the full tax credit.  

Key Information

Following are key points that prospective home buyers should be aware of when considering a home purchase under the tax credit program.

  • A tax credit of up to $8,000 is available for first-time home buyers purchasing on or after January 1, 2009 and on or before April 30, 2010. In cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.
  • A tax credit of up to $6,500 is available for repeat home buyers who have owned a home for five consecutive years out of the prior eight years. The repeat home buyer tax credit applies to houses sold after November 6, 2009 and on or before April 30, 2010. In cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.
  • Income limits of $125,000 for individuals and $225,000 for married couples filing jointly apply to all sales occurring after Nov. 6, 2009.
  • The income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009 are $75,000 for individual taxpayers and $150,000 for married couples filing jointly.
  • Homes priced above $800,000 are not eligible for either the first-time home buyer tax credit or the repeat home buyer tax credit.
  • Home purchases in 2010 may be claimed on an amended 2009 income tax return.
  • Persons who are claimed as dependents by a taxpayer or who are under age 18 do not qualify for a tax credit.
  • Home purchases from relatives of the taxpayer or the taxpayers spouse do not qualify for the tax credit. The IRS defines relatives as ancestors (parent, grandparent, etc.), lineal descendants (child, grandchildren, etc.) and spouses.
  • Married couples are not eligible to claim the first-time home buyer tax credit if either spouse has previously owned a home. They may, however, qualify for the repeat home buyer tax credit.
  • Neither the first-time home buyer tax credit nor the repeat home buyer tax credit have to be repaid unless the home is sold or ceases to be used as the buyers principal residence within three years after the initial purchase.
  • Taxpayers must submit a copy of the HUD-1 settlement statement and IRS Form 5405 to claim either the first-time home buyer tax credit or the repeat home buyer tax credit.

Source: National Association of Home Builders

Everybody's tax situation is different and if you are uncertain if these programs are right for you we strongly encourage you to speak with your personal  tax or financial professional.