Home Buyer's Tax Credits - Update

Home Buyer's Tax Credits - Update
Last week a law was signed which extended the Home Buyer's Tax Credits which was due to expire on November 30th. This law is intended to increase house sales and therefore, help in economic recovery. Listed below are some of the important facts about the extended Home Buyer's Tax Credit:

If you are a first-time home buyer, you can still get a tax credit of as much as 10% of the purchase price. The maximum tax credit is $8,000. To qualify as a first time home buyer, a individual or partners of a married couple, must not have owned a principal residence for three year prior to the purchase.

If a home buyer uses the tax credit, they must use the residence as their principal residence for the next three consecutive years.

2009 home buyers can claim the credit on their 2008 or 2009 tax returns and 2010 home buyers may claim the tax credit on either their 2009 or 2010 tax returns.

The tax credit is a dollar for dollar reduction of tax. This means that they are refundable. In other words, if you owe the IRS, say $5,000 in tax, you could receive a refund in the amount of $3,000.

Buyers are not eligible if they purchase a home from a relatives, such as a parent, grandparent, children, grandchildren, a spouse or spouse's relative.

A purchase contract must be in place by May 1, 2010 and the transaction must be closed before July 1, 2010.

No credit is available for homes costing more than $800,000.

Repeat buyers are eligible for a tax credit up to $6,500 if they have lived in one residence for 5 straight years of the previous eight years. The purchase price of the new home does not have to cost more than the old home.

Income limits for the tax credit are as follows: single filers - the credits phase out with income between $125,000 and $145,000 of modified adjusted gross income; married couples - the credits phase out with income between $225,000 and $245,000 of modified adjusted gross income.

Most buyers must be 18 years old or over.

You cannot take the tax credit if you are claimed as a dependent on someone else's tax return.

Anyone taking the tax credit will have to provide proof of purchase.

A principal residence can be a condo, co-op apartment, attached or semi-attached townhouse. If there are eating, sleeping and toilet facilities, even a boat, motor home or trailer may qualify. Manufactured homes qualify some states. It must be used as a principal residence.

Members of the military, foreign service and intelligence that are serving overseas on official extended duty for at least 90 days during 2009 and the first 4 months of 2010 will have an extra years to claim these tax credits.

For additional information, consult your tax advisor or visit the official IRS website.

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