After much debate and discussion, the Homebuyers’ Tax Credit has officially been extended to April 30, 2010. The housing tax credit extends the $8,000 tax credit for home buyers who are purchasing their first home from the current November 30 deadline until April 30, 2010. It also expands the program to offer a credit of $6,500 to other homeowners who have lived in their current home for at least five years and are seeking to buy a new home.
Yet another modification raises the income limits for program participation for a single person from $75,000 to $125,000. The income limit for a couple rises from $125,000 to $225,000. A tax credit is available to those with higher incomes, but the credit begins to diminish above these income limits.
Here are other program rules:
- You must not have owned another home for at least the previous three years – first time buyers.
- You must buy a home (or have a binding contract to buy) by April 30, 2010. Under the new law, if the sale doesn’t close on time, you can still get the credit as long as you’ve got a binding contract on April 30, 2010.
- You must be older than 18 and not claimed as a dependent by any other taxpayer.
- The property cannot have been acquired from a relative.
- A copy of the Settlement Statement must be attached to your tax return to claim the credit.
- Borrowers must continue to own the new home for at least three years. If sold sooner, the credit might have to be repaid. (Some exceptions – see below.)
Special rules for military
The government will not require repayment of the credit if you are a member of the military and had to sell or stop using the home as a residence because of extended duty.
In addition, those serving outside of the U.S. during any part of 2009 or early 2010 will get an additional year to claim the credit. In other words, the credit ends for most people on April 30, 2010, but it lasts until April 30, 2011, for active-duty service members working overseas.
The $6,500 credit for current homeowners:
If you have owned and lived in a home for at least five consecutive years of the last eight years, you could qualify for a $6,500 tax credit.
The requirement means that this credit could accommodate people who lost their homes in the last few years due to foreclosure or those who sold a home and didn’t immediately buy a new one.
Homebuyers would NOT have to sell the current residence in order to qualify for the $6,500 credit when buying a new home. But the new home must become the principal residence. Nothing in the law says the current home cannot be kept as a second home or rental.
The passage of the bill was was bipartisan – a rare occurrence in the current administration.
Goes to show there must be massive agreement about the affect of housing on our economy and how critical it is to remedy the mess created.
The IRS has posted some frequently asked questions and answers here.
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