First Time Homebuyer Tax Credit Extended Into 2010!

Plus...A New Tax Credit for Certain Existing Home Owners!

It's official. President Obama has signed a bill that extends the tax credit for first-time homebuyers (FTHBs) into the first half of 2010. This program had been scheduled to expire on November 30, 2009.

In addition to extending the tax credit of up to $8,000 through June 30, 2010, the extension measure also opens up opportunities for others who are not buying a home for the first time.

The program that has existed for FTHBs remains intact with the one exception that more people are now eligible based on an increase in the amount of income someone may now earn.

Additionally, the program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Qualifying buyers may purchase a property with a maximum sales price of $800,000.

2009 Homebuyer Tax Credit has been revised. Please refer to links above for updated information on the new guidelines.

2009 Homebuyer Tax Credit

First-time homebuyers who purchase homes between January 1, 2009 and November 30, 2009 may be eligible for a tax credit equal to the lower of $8,000 or 10% of the value of the home.  Remember a tax credit is very different than a tax deduction –a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.  

• The maximum credit is $8,000 or 10% of the home purchase, whichever is less.
• The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009. 
• The full amount of the eligible tax credit is refunded to the buyer, regardless of whether the buyer has paid an equivalent amount in taxes.
• The Tax Credit is for home buyers (either spouse if filing jointly) who have NOT owned a principle residence during the three-year period prior to the purchase.  Ownership of vacation property or rental property does not disqualify home buyers from this program.
• To qualify for the full tax credit, married couples' modified adjusted gross income (MAGI) should be under $150,000 and single filers' MAGI should be less than $75,000. Partial tax credits may be available for married couples with MAGI incomes of over $150,000 but under $170,000 and single filers with incomes over $75,000 but under $95,000.  If married couples who qualify for the first-time tax credit file separately, they would both claim 5% of the home purchase or $4,000 each (whichever is less) on their tax returns.
• Home buyers who qualify for this program, but who do not intend to purchase a home till the end of 2009, may elect to alter their tax withholdings (up to the amount of the of the tax credit) in order to save up money for a down payment.  However, if the purchase of the home does not occur, the taxes must be repaid to the IRS.
• There is no recapture or repayment clause IF the home is owned for at least 36 months.
• The effective date of purchase for new construction (even if buyer owns title to the lot) is the date the owner first occupies the house.  So even if construction began in 2008, as long as the home and buyers qualify for the tax credit, they will be eligible if they take possession any time during 2009.   However, new construction bought from the builder is only eligible if the settlement date (closing) takes place between January 1, 2009 and December 31, 2009.
• The law allows taxpayers to elect to treat qualified 2009 purchases as a 2008 purchase so that they can receive the tax credit on their 2008 tax returns.