First-Time Home Buyer Tax Credit: 8 Things to Know

Now that the President has signed the bill which extends the tax credit, here’s what consumers should know.

The extension works in large part the same way it did before, $8000 is available for first time home buyers who have not owned a principle residence in the last 3 years. The changed and new provisions are detailed below.

1. The tax credit has been extended. Purchasers have until April 30, 2010 to have an executed contract (all parties agree and have signed), and must close on the property by June 30, 2010 in order to receive the credit.
2. There is now a $6500 credit. It’s available for folks who have lived in their home as a principle residence for 5 of the last eight years (consecutively), and would like to buy a home.
3. Income caps for qualifying. These have been changed by the legislators – a single taxpayer earning up to $125,000 can qualify, as well as a married couple earning up to $225,000. The $20,000 income phase out works as it did before, i.e. the credit phases out as the taxpayer’s income approaches $20,000 over the qualifying earnings cap.
4. Purchase Price. The home purchased can be no more than $800,000 to claim the credit – regardless of whether the purchaser is single or married.
5. The credit continues to be Refundable, as it was before.
6. The credit continues to contain provisions that the purchaser must own the home for 3 years or pay back the credit.
7. Members of the Military who serve outside of the US for 90 days have received an extension of the credit for one year.
8. The extension contains a fraud component which stipulates the purchaser must attach documentation of the sale to the tax return.