Tax Credit Extension and Expansion Explained

Tax Credit Extension and Expansion Explained

Tax Credit

The $8,000 tax credit for first time buyers has been extended to April 30, 2010 ( June 30 for committed contracts signed by April 30 ). The credit is 10% of the purchase price to an  $8,000 maximum.

Effective 11/7/09 a new tax credit of $6,500 is available to homebuyers who were existing homeowners for 5 of the previous 8 years ( based on the closing date of the new purchase ). 

The maximum price for a home to qualify for the existing homeowner credit is $800,000.

How It Works

You can apply for the credit for your 2008 tax return or your 2009 tax return for a 2009 purchase and 2009 or 2010 returns for a 2010 purchase.

If you apply for the credit on your 2008 return ( which was already filed), and if you don't owe

any unpaid taxes, the IRS will send you a check for the $8,000 ( or your actual credit amount). If you file with your 2009 return, the credit will offset any taxes due or will be added to your refund.

The time to receive the check may be little as 2 weeks.

Income Limits

Purchases after 11/6/2009 limits are:

$125,000 to $145,000 for individuals

$225,000 to $245,000 for joint filers

Other Rules

The credits are available only for primary residences, not second homes or investment properties.

Sale can't be between related persons

Home must remain main home for 3 years.

You can't apply for the credit until after the closing. 

How To

File Form 5405 for the tax year you elect to use (current form not for use by existing homeowners)

The IRS has not produced the revised Form as of this posting (11/29), but, says it will in December