The Worker, Homeownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. It also authorized a tax credit of up to $6,500 for qualified repeat home buyers.
The extension that was set to end this month has been extended for another seven months. In order to qualify for the first time home buyer tax credit you must buy your home by May 1, 2010 and close by July 1, 2010. A ' first time' home buyer according to the government is a person who has not owned a home within the past 3 years. The tax credit is for 10 percent of the purchase price of the home with a maximum of $8,000 for a single tax payer or $4,000 for a married couple filing separate returns.
New Long Time Home Owner Tax Credit
The new law has expanded the tax credit to long time home owners who are buying a replacement home after November 6, 2009. Similar to the first time home buyer tax credit, the credit is for 10 percent of the purchase price with a maximum of $6500 for a single tax payer or $3250 for a married couple filing separate returns. To qualify, you must have owned and used the same home as your principal residence for at least five consecutive years of the eight-year period ending on the date you by your new principal residence.
Increased Income Limit
The credit is phased out based on your modified adjusted gross income (MAGI). Different income limits apply to purchases on or before Nov. 6, 2009 and those after that date.
For purchases after Nov. 6, 2009, for a married couple filing a joint return, the phase-out range is $225,000 to $245,000. For other taxpayers, the phase-out range is $125,000 to $145,000. This means that the full credit is available for married couples filing a joint return whose MAGI is $225,000 or less and for other taxpayers whose MAGI is $125,000 or less.
For more information on the updated tax credit, the IRS.gov website has all the Basics in a Question and Answer format that is easy to read. Click here to read more.