First Time Homebuyer's Credit Extended

Last year Congress passed a bill allowing an $8,000 tax credit for first time homebuyers as an incentive to increase spending in the housing market. To be eligible for the credit you must not have owned a home for at least three years prior to the purchase and the purchase must be made for a primary residence; rental properties and vacations homes did not qualify. The credit was good for 10% of the value of the home up to $8,000, meaning that as long as the house you purchase was worth more than $80,000 you will qualify for the entire credit. The original bill, which expired on November 20, 2009, was extended late last year to run through April 30th of this year with a few notable changes.

Unlike the credit available in 2009, the new $8,000 credit does not have to be repaid as long as you live in the home for at least three years. If you sell before those three years are up you will pay the $8,000 back as extra tax on your return the year that you move. Also, the credit for 2010 does not apply to houses worth more than $800,000. There was no value cap on the old credit. One last change to keep in mind; the new law has increased the income limits from $75,000 for an individual and $150,000 for married couples to $125,000 for individuals and $225,000 for married couples.

In addition to the first time homebuyer’s credit extension, the new bill also includes a provision for long-time homeowners. If you’ve owned a home for at least five out of the last eight years then you may qualify for a 10% credit on the purchase of a new home up to $6,500. The same dates and income limits apply to the long-time homeowner’s credit as to the first time homebuyer credit.



Source

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