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President Barack Obama has approved the first-time homebuyer tax credit
extension which will extend the tax credit until April 30, 2010.
The extension is part of a $24 billion economic stimulus bill that
will extend the $8,000 tax credit for homebuyers who are purchasing
their first home from the current November 30 deadline and expands the
program to offer a credit of $6,500 to homeowners who have lived in
their current home for at least five years and are seeking to relocate.
The following details apply to the homebuyer tax credit expansion:
Who is Eligible
-First-time homebuyers, who are defined by the law as buyers who
have not owned a principal residence during the three-year period prior
to the purchase, may be eligible for up to an $8,000 tax credit.
-Existing homeowners who have been residing in their principal
residence for five consecutive years out of the last eight and are
purchasing a home to be their principal residence ("repeat buyer"), may
be eligible for up to a $6,500 tax credit.
-All U.S. citizens who file taxes are eligible to participate in the program.
Income Limits
Homebuyers who file as single or head-of-household taxpayers can
claim the full credit ($8,000 for first-time buyers and $6,500 for
repeat buyers) if their modified adjusted gross income (MAGI) is less
than $125,000.
-For married couples filing a joint return, the combined income limit is $225,000.
-Single or head-of-household taxpayers who earn between $125,000
and $145,000, and married couples who earn between $225,000 and
$245,000 are eligible to receive a partial credit.
-The credit is not available for single taxpayers whose MAGI is
greater than $145,000 and married couples with a MAGI that exceeds
$245,000.
Effective Dates
-The eligibility period for the tax credit is for homes purchased
after Nov. 6, 2009, and before May 1, 2010. However, home purchases
subject to a binding sales contract signed by April 30, 2010, will
qualify for the tax credit provided closing occurs prior to July 1,
2010.
Types of Homes that Qualify
-All homes with a purchase price of less than $800,000 qualify,
including newly-constructed or resale, and single-family detached,
townhomes or condominiums, provided that the home will be used as their
principal residence. Vacation home and rental property purchases do NOT
qualify.
Tax Credit is Refundable
-A refundable credit means that if the amount of income taxes you
owe is less than the credit amount you qualify for, the government will
send you a check for the difference.
-For example:
-A first-time buyer who qualifies for the full $8,000 credit who
owes $5,000 in federal income taxes would pay nothing to the IRS and
receive a $3,000 payment from the government. If you are due to receive
a $1,000 refund, you would receive $9,000 ($1,000 plus the $8,000
first-time homebuyer tax credit).
-A repeat buyer who owes $5,000 would pay nothing to the IRS and
receive $1,500 back from the government. If you are due to get a $1,000
refund, you would get $7,500 ($1,000 plus the $6,500 repeat buyer tax
credit).
-All qualified homebuyers can take the tax credit on their 2009 or 2010 income tax return.
Payback Provisions
The tax credit is a true credit. It does not have to be repaid
unless the home owner sells or stops using the home as their principal
residence within three years after the purchase
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