More on the Home Buyer Tax Credits

The first-time homebuyer's tax credit has been extended beyond the original deadline of November 30, 2009. Under the new program first-time buyers have to be under contract by April 30, 2010 and close before July 1, 2010. First-time buyers may qualify for 10% of the purchase price, up to a maximum of $8,000.

The tax credit has been extended to qualified move-up/repeat buyers purchasing a principal residence after November 6, 2009. The same deadlines apply, the purchaser must be under contract by April 30, 2010, with a close date before July 1, 2010.

Some commonly asked questions about the tax credit:

Who qualifies as a first-time buyer?

The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

Who qualifies as a move-up/repeat buyer?

The law defines this type of buyer as a home owner who has owned and resided in a home for at least five consecutive years of the eight years prior to the purchase date. Repeat buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit. Also, if the buyer sold their previous home and has been living elsewhere for up to three years, they may still qualify for the tax credit if they meet the residency requirement of living in the previous home for five consecutive years out of the past eight.

What are the new income limits?

For sales occuring after November 6, 2009, the new limits allow individuals to earn up to $125,000/year and married couples up to $225,000/year. For sales that closed between January 1, 2009 and November 6, 2009, the income limits were $75,000 (single taxpayers)/$150,000 (married filing jointly).

Is there a partial tax credit for higher incomes?

The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $125,000 (single)/$225,000 (married). The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts. If you fall within this limit, consult with a tax adviser to determine the actual amount of your tax credit.

What types of homes qualify?

Any home that will be used as a principal residence will qualify for the credit, as long as the purchase price is less than or equal to $800,000. This includes single-family (existing and new), townhouses, condos, manufactured homes and houseboats. Homes purchased from family members are not eligible.

Is there a minimum amount of time I must remain in the home?

You must remain in the home using it as your primary residence for a minimum of three years. If you sell the house within the initial three years, you will be required to return the tax credit.