EXTENDED First Time Homebuyer’s Tax Credit

Great news for homebuyers was unveiled last December. Specifically, the $8,000 first-time homebuyer tax credit has been extended. Not only that, it’s got a lot of new great features that make the program available to a wider variety of people. Find out why the tax credit has been extended and discover how you might qualify for thousands of dollars in tax credits when buying your new home.

Why the tax credit was extended

The goal of the initial homebuyer tax credit was to jumpstart the depleted housing market. It certainly did a good job of getting new homeowners into the game, but the difficulty came in getting the large mortgage companies in motion quickly enough to meet the deadline.

Because of these delays and the fact that lawmakers don’t want to see home sales slip back down, a proposal recently went through Congress to extend the credit out through April. It also made for some new bonuses for buyers getting in on the deal (these are discussed in depth, below).

Many real estate agents vouch that the homebuyer’s credit did a great job in boosting sales but were worried that sales would drop off during the winter months. Winter months typically mean slower sales for the housing market and in a precarious situation like today’s economy, slower sales could thwart the progress that’s already been made.

Given all this, President Obama extended the act in early November. Government officials called it a “lifeline” to those who’ve been hard hit by the recession but are looking to boost themselves back into the housing market.

Key provisions in the tax credit extension

1. Deadline extended. To start with, the deadline for the first time homebuyer tax credit has been moved from November 30th, 2009 to April 30th, 2010. This means any qualifying home purchase made prior to April 30th will still qualify for $8,000 in tax credits.
2. First-time homebuyers still get $8,000. Though it was proposed that the credit amount go down for this second round of home ownership incentives, Congress ultimately moved to keep the maximum credit amount at $8,000. This means any person who has not owned a home prior to the three years before purchasing a new one can get a full $8,000 back from their taxes.
3. Long-time residents have a new credit incentive. One new provision of this bill grants up to $6,500 in tax credits to new home purchasers who do not qualify as first-time homebuyers. For this incentive a person must have owned and lived in the same home for five consecutive years within the eight-year period that ends on the day a new home is purchased. This new home must also serve as a primary residence.
4. Income limits have been raised. For anyone who purchases a home after November 6th, 2009, a new and higher income limit will be applied. Now anybody with an adjusted gross income of up to $125,000 for single filers and $225,000 for joint filers will be eligible for the full $8,000 credit. For homebuyers who make between $125,000 and $145,000 for single filers and between $225,000 and $245,000 for joint filers, a reduced tax credit applies. Anybody whose income is higher than those maximums is not eligible for a credit.
5. Tax return flexibility. Homebuyers now have the option to claim the first time homebuyer tax credit on either their 2009 or 2010 tax returns provided their purchase is made in 2010.

New restrictions in the tax credit extension

The following restrictions now apply to the homebuyer tax credit:

• Dependents may not claim the tax credit
• If the price of a home is over $800,000, no credit will be issued
• On the date of purchase, a buyer must be at least 18 years old

A bonus for service men and women

In addition, members of the Armed Forces and some federal employees currently working outside the United States have been given an extra year in which to buy a house and qualify for the credit. For these people, eligible purchases must be drawn up in a binding contract by April 30, 2011 and the purchase must be closed by June 30, 2011.