The President has approved the first-time home buyer tax credit extension which will extend the tax credit of up to $8000 until April 30, 2010.
The extension is part of a large economic stimulus bill that will extend the $8,000 tax credit for home buyers who are purchasing their first home from the current November 30, 2009 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 buy a home.
The following details apply to the home buyer tax credit expansion:
First-time home buyers, 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. This is the tax credit that has been in place this year and is largely credited with keeping the housing market as stable as it has been,
Current homeowners who have been residing in their principal residence for five consecutive years out of the last eight and are purchasing a new home to be their principal residence, may be eligible for up to a $6,500 tax credit.
Who is Eligible??
Income Limits:
Home buyers 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 is less than $125,000 or 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.
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 under contract 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, town homes or condominiums, provided that the home will be used as their principal residence. Vacation home and rental property purchases don’t qualify.
Tax Credit is Refundable:
This 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.
As an 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 home buyer 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 home buyers 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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