2009-2010 Tax Credit Information

January 27, 2010 · Print This Article

The Tax Credit Extension is part of a $24 billion economic stimulus bill that extends the $8,000 tax credit for homebuyers who are purchasing their first home 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 relocate.

The following details apply to the homebuyer tax credit expansion:

Who is Eligible:

First-time homebuyers, 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.
Existing homeowners who have been residing in their principal residence for five consecutive years out of the last eight and are purchasing a home to be their principal residence (repeat buyers) may be eligible for up to a $6,500 tax credit.
All U.S. citizens who file taxes are eligible to participate in the program.

Income Limits:

Homebuyers 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 (MAGI) is less than $125,000.
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.
The credit is not available for single taxpayers whose MAGI is greater than $145,000 and married couples with a MAGI that exceeds $245,000.

Effective Dates:

The eligibility period for the tax credit is for homes purchased after Nov. 6, 2009, before May 1, 2010. However, home purchases subject to a binding sales 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 primary residence homes with a purchase price of less than $800,000 qualify including:

newly-constructed or resale
single-family detached
town homes
condominiums

Vacation homes and rental property purchases do NOT qualify.

Tax Credit is Refundable

A refundable credit 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.

Examples:

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. A first-time buyer due to receive a $1,000 refund, would receive $9,000 ($1,000 plus the $8,000 first-time homebuyer tax credit).
A repeat buyer who owes $5,000 would pay nothing to the IRS and receive $1,500 back from the government. A repeat buyer due to get a $1,000 refund, would get $7,500 ($1,000 plus the $6,500 repeat buyer tax credit).
All qualified homebuyers 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.

The www.federalhousingtacredit.com site is being updated. Check the site for more detailed information on the tax credit.

Written by Mark Ramsey