What was originally considered a “First-Time Homebuyer” tax credit has been extended into 2010, so I thought I’d give you the key points you need to know regarding the new extension.

It’s Important to note, the key points in this post are applicable to transactions that take place AFTER November 7, 2009. If you closed on your home before this time, please see my other post regarding the 2009 Homebuyer Tax Credit.

This post will be updated accordingly when the revised form number 5405 has been made available on the IRS website.

1. First and foremost, this credit no longer applies to just first-time homebuyers and/or those that haven’t owned a home in the last three years.  The credit now applies to existing homeowners as well. Here’s the breakdown of who qualifies for the credit:
   1. First-time homebuyer – If you’ve never purchased a home before you are a first-time homebuyer.
   2. Owned a home 3 or more years ago – If you held no ownership interest in a home for AT LEAST THREE YEARS PRIOR to the date you close on a home you plan to buy
   3. Existing homeowners – This category includes those individuals who have used their existing home as a principal residence for FIVE CONSECUTIVE YEARS during the last eight years. There are a few scenarios that apply here. If you’d like to run your situation past me, feel free to contact me to help you determine whether or not you qualify.
2. The income caps have been raised.
   1. If you make $125,000 ($225,000 if married) or less you are eligible for the full amount either $8,000 or $6,500
   2. If you make between $125,001 and $145,000 ($225,001 to $245,000 if married) the credit amount is reduced
   3. If you make over $145,000 (over $245,000 if married) you are not eligible for the credit
3. The amount available for the credit varies based on how you qualify:
   1. $8,000.00 - First-time homebuyers and those that haven’t owned a home within the last three years qualify for up to $8,000 based on the purchase price of the home.
      1. If you are married filing separate, the amount each of you can claim is 50% of what the transaction qualifies for (i.e. if the transaction qualifies for the full $8,000 credit, each of you may claim $4,000)
      2. If you purchased the home with others you can claim a certain percentage of the total amount received for the credit.  For example if two people purchased the home equally, the ownership interest would be 50%; three people 33%, etc...
   2. $6,500.00 – Existing homeowners qualify for up to $6,500 based on the purchase price of the home.
      1. If you are married filing separate, the amount each of you can claim is 50% of what the transaction qualifies for (i.e. if the transaction qualifies for the full $6,500 credit, each of you may claim $3,250)
      2. If you purchased the home with others you can claim a certain percentage of the total amount received for the credit.  For example if two people purchased the home equally, the ownership interest would be 50%; three people 33%, etc…
4. The Date for this particular extension is April 30, 2010.  If you qualify for the credit and you have an accepted purchase agreement on or before April 30, 2010 you may claim the credit; however, the transaction MUST CLOSE ON OR BEFORE JUNE 30, 2010.
5. Maximum purchase price for the home cannot exceed $800,000.
6. You must attach the HUD/Proof of Purchase for the home to your amendment.  The 2009 tax credit did not require one to attach proof of purchase which sparked a slew of individuals taking advantage of the program. As a result, you must supply proof of purchase when you submit the claim for the credit.
7. There is a possibility that you’ll have to pay back the credit
   1. If you sell the home you purchased within three years you may be required to repay the money you received. There are other possibilities, please see form number 5405’s instructions for further information regarding repayment requirements.
      1. It’s important to note, this may change based on the information provided in the revised form. I will update this post accordingly if this requirement change
8. To claim the credit you’ll need to complete IRS form number 5405 and submit it with your 2010 or 2011 tax return.  In addition you can file an amendment to your return if you’d already completed a return before you purchased your new home.
   1. Again, it’s important to note that the current form number 5405 will be amended to reflect he new provisions of the tax credit. If you close on your home AFTER November 6, 2009, you will need to submit the revised form…DO NOT USE THE CURRENT 5405 FORM if you closed after this date. I will update this post to reflect the new form when it is made available.

Here are a few more posts you may find useful:

Buying a Home
8 Things to Consider When Buying a Home
Answers To: How Much Money Is Needed To Buy A Home?
How the HUD Bidding Process Works
Pre-Qualification vs. Pre-Approval, Which is better?

Selling Your Home
Should You Sell Your Home Before Buying a New One?