What you should know about the EXTENDED

First-Time Homebuyer Tax Credit

 

Congress and the President have extended and expanded the $8,000 tax credit for first-time buyers.  You now have until April 30, 2010 to sign a contract and qualify.  AND, starting November 7, many existing homeowners also qualify.

 

  • The temporary credit is only available for home purchases that go to contract before May 1, 2010, and that close before July 1, 2010.
  • It's equal to 10% of the cost of the home, up to a maximum credit of $8,000.  (For example, a home purchased for $80,000 or more would qualify for the full $8,000 credit, while a $70,000 home would qualify for only 10% of $7,000)  But homes that cost more than $800,000 are ineligible for any tax credit.
  • This is a tax credit, which is even better than a tax deduction; it's subtracted directly from your tax liability.  If the credit is more than your total tax liability that year, you will receive a refund check for the balance.  (Note that a married buyer filing separately is only eligible for up to a $4,000 credit.)
  • Eligible properties include anything that will be used as a principle single-family residence, including condos and townhouses.
  • First-time homebuyers can take advantage of the full $8,000 tax credit.  A first-time buyer is defined as an individual who has not owned a home the past three years.  For married joint filers, both must meet the first-time buyer criteria to take the credit on a joint return. 
  • Existing homeowners who have lived in their current homes for five consecutive years out of the past eight are eligible for up to a $6,500 tax credit when they purchase a new home.
  • There are income guidelines on the credit.  Individuals with an adjusted gross income up to $125,000 (or $225,000 if filing jointly) are eligible for the full tax credit.  The credit is phased down for those earning more and is not available for those with an income above $145,000 (or $245,000 if filing jointly.)