Good News: Home Buyer Tax Credit Extended

If you haven’t already heard, Congress has extended and expanded the home buyer tax credit. This means extra time for those of you who weren’t able to close by the original December 1, 2009 deadline, and an added credit if you’re a current homeowner looking to purchase.

Why is this such good news? Because there has never been a better time to purchase a home…but be careful because Congress has indicated this will be the last extension of this credit.

For First-Time Buyers:

First off, who exactly qualifies as a “first-time buyer”? Well, it’s pretty simple: anyone who has never owned a home OR has not owned a home for 3 years prior to your purchase.

The amount of the credit is still 10% of the purchase price up to a maximum of $8,000. The deadline has been extended to April 30, 2009, but if a written contract to purchase is in effect by April 30, 2010 the purchaser will have until July 1, 2010 to close.

People with higher incomes can now qualify for the credit, but this only applies to purchases occurring after November 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 single taxpayers and $150,000 for married couples filing jointly.

For Current Homeowners:

Who qualifies for this credit? Buyers who have owned and lived in their previous home for five consecutive years out of the last eight years. The amount of the credit is 10% of the purchase price up to a maximum of $6500.

However, if you make more than $125,000 as a single filer or $225,000 as a married filer you will not be eligible for this credit.

Frequently Asked Questions:

1. What types of home will qualify? Any home that will be used as your primary residence, as long as the home is less than or equal to $800,000. But also note that you cannot purchase a home from any family members.
2. How do you claim the tax credit? You have to claim the tax credit on your federal income tax return. Remember this is not a deduction so you get the entire amount of the credit. Also, you do not get the credit at closing. No other applications are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for either tax credit by talking with a professional before moving forward.
3. Do you have to repay the tax credit? Not as long as you live in the home for at least 3 years. If you no longer use the property as your principal residence before that time, you are required to repay the credit.