The extension and expansion of the homebuyers tax credit, signed into law on November 6th, allows more

first-time buyers to qualify and creates an entirely new credit for existing homeowners who buy a new home.

Buyers must have a contract on a home by April 30, 2010 and they have until June 30, 2010 to close in order to qualify.

Amounts:

  • The first-buyer credit remains 10 percent of the cost of the home or $8ooo, whichever is less.
  • The credit for existing homeowners is 10 percent of the value of the new home or $6500, whichever is less.

Definitions:

  • A first-time homebuyer cannot have owned a primary residence during the past three years.
  • Existing homeowners must have owned and occupied the same primary residence for five out of the preceding eight years.
  • Only primary residences qualify.  No second homes or investment properties.

Income limits:

  • The measure raises the income limits for those claiming the credit to $125,000 a year for individuals and $225,000 for couples, up from $75,000 and $150,000 in the previous first-time buyer credit. After that, the value of the credit phases out.
  • The cost of the new home cannot exceed $800,000.

Applying for the credit:

  • Use IRS form 5405, which you file with an amended tax return.
  • For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.
  • For more information on applying, go to www.irs.gov