The original tax credit was targeted for first-time home buyers and expired at the end of November. However, the government revised the plan and expanded it to include all buyers of primary homes. Along with the current buyer's market that we are experiencing, this is an added bonus to most homebuyers.
Here's how it works:
Who Can Take Advantage of This?
All first-time buyers (designated as not having owned a home in the past three years) and current homeowners who have have lived in their home for five consecutive years during the past eight years before they purchase the new home.
When Does the Tax Credit Expire?
Previously, one must have closed on their purchase by the deadline. This time, a contract must be signed by April 30, 2010 and the closing must occur by June 30, 2010.
How Much is the Credit?
It's different depending on your status. If you are a first-time home buyer, then the credit is 10% of the cost of the home up to $8000. If you are a current homeowner, the credit is also 10% of the purchase price but only up to $6500.
Does Income Make a Difference?
The income requirements were raised this time around. If you are an individual, you must make less than between $125,000-$145,000 or between $225,000 and $245,000 for joint filers.
Can Any Type of Property Be Bought?
The residence that you buy must be your primary home - it can be a single family home, a condo, co-op, mobile home, etc, but it cannot be a vacation home. It can even be a houseboat as long as it is not your primary residence.
Is There a Limitation on Price?
The purchase price of the home cannot exceed $800,000.
Do I Get My Money Back at Closing?
No the tax credit is reclaimed when you file either your 2009 or 2010 income tax form. There is a special IRS form for this, Form 5405.
Is This a Loan?
The credit does not have to be repaid as long as you stay in your new home for at least three years. If you have to sell before that time, the credit must be paid back in full.
This credit will not work for everybody, particularly here in the North Shore suburbs of Winnetka, Wilmette, Kenilworth and Glencoe where most income is higher than the minimum required to receive the credit. But if you make the cut, then this could mean a little extra money in your pocket.