Basics of the Extended and Expanded Home Buyer Tax Credit

Definitely time to update this page as April 30 has come and gone and if you don’t already have a home under offer you will not be eligible for this tax credit. If you do have a home under offer these basic rules still apply:

Amount

For first time home buyers:The tax credit is for 10 percent of the home purchase price, up to a maximum of $8,000.
Repeat Buyers: The home buyer tax credit is for up to $6,500

Time frame To Purchase Your Home

To qualify, you must have an accepted offer on a home by April 30, 2010 and close by June 30,2010.
You MUST close on the purchase of a home before claiming the tax credit.

How to Claim the Tax Credit

You have two options when it comes to claiming the credit. You can re-file your taxes for this year and include form 5405. Your other option is to use the form to file with your 2010 tax return next year. Along with form 5405 you will need to include the settlement statement, (known as a HUD-1 settlement statement), that you will receive at closing. Whether you file this year or next year you will need to do it manually, the IRS is not accepting online applications for the tax credit, because of the large number of incidents of fraud last year.

Income Limits

The credit begins to phase out at a modified adjusted gross income (MAGI) of125,000 for single filers, and $225,000 for joint filers.

Refundable Credit

The home buyer tax credit is fully refundable; if the credit exceeds your tax liability, you will get a check in the mail for the difference.

Required Criteria for Repeat Buyers

You need to have occupied a home as your primary residence for 5 consecutive years in the 8 years previous to buying a replacement home. I’m sure I’m not the only one to see this, but if you look below you’ll see the definition of a first time home buyer is someone who hasn’t owned a home for the last 3 years. If you sold your home 3 years ago after living there for 5 years, you may qualify for the up to $8000 tax credit, so why would you claim a lesser credit, when you’re eligible for more? That’s something I would check with a tax professional before filing your taxes.

Definition of a First Time Home Buyer

In this case, “first-time home buyer” means that you haven’t owned a home for at least three years. If you are married, neither spouse is eligible if either has owned a home in the past three years. Also, the home you purchase must be your primary residence; you cannot claim the credit on a vacation or investment home purchase. Eligible properties include single family homes, condos and zero lots.

Repayment

Repayment is not required, unless you move out of the residence within 3 years.