Friday, November 20, 2009

Update on Homebuyers' Tax Credit

Q      Is it true that the First-time Homebuyer’s Tax Credit is continuing beyond December?

A      Yes.  President Obama signed an extension and expansion of the first-time homebuyer’s tax credit recently.  The $8,000 credit was scheduled to lapse on Dec. 1, 2009, but will now be in effect through the end of June 2010. Homebuyers must sign a contract before April 30 and close by June 30, 2010. The income limits were also raised: Single buyers can now earn up to $125,000 and still get the full credit while a married couple can earn $225,000.
The bill also made more homeowners eligible to claim the credit on their taxes. First-time buyers -- those who have not owned a home in the past three years -- still qualify for an $8,000 rebate. But now people who want to trade up can also qualify. Those who have owned and occupied a residence for at least five years out of the past eight can claim a $6,500 tax credit if they close on a purchase by the end of June.
Homebuyers who purchase a home in 2009 or 2010 (or purchased a home in 2008) may be able to take advantage of the first-time homebuyer credit. The credit:
  • Applies only to homes used as a taxpayer's principal residence.
  • Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.
  • Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.