Home Buyers Tax Credit

Good news! The New Home Buyer's Tax Credit has been extended. You now have until April 30, 2010 to buy a home and have the IRS give you a tax credit of up to $8,000! Better yet, the IRS definition of a first time home buyer is more lenient than you might think. To qualify as a first time home buyer, you must not have owned a main home at any time during the previous three years.

So technically, you don't really have to be a first time home buyer, you just have to not been a homeowner recently.

I've been feeling so left out, why is it only the new home buyers who get a credit? Not to worry, the IRS passed new regs and now long term home buyers can get a tax credit when they buy a new main home. To qualify as a long term home buyer your must have been living continuously in your main home for 5 of the last 8 years. You can a smaller credit, only $6,500. But still, it is free money and I'll take it.

There are some limits, so even if you qualify as a first time home buyer, or as a long term resident you may not qualify for the credit. You don't qualify if the home you are purchasing costs more than $800,000, or if your income is over $145,000. ($245,000 for joint filers). On the other end of the income scale, you also don't qualify if you are under 18, if you can be claimed as a dependent on anyone else's tax return, or if you buy your home from a related party.

If you want to claim the credit, don't delay on buying a home. The IRS has extended the credit a couple of times, but there is no guarantee that they will extend it again. You must enter into a binding contract to purchase your home before April 30, 2010. And you must close no later than June 30, 2010. Stay on top of it all, being just one day late could cost you $8,000!

If you purchase a home in 2009, you can claim the credit when you file your 2009 taxes, or you can amend your 2008 tax return and maybe get your refund sooner.  And likewise, if you purchase a home in 2010 you can claim the credit on either your 2009 or 2010 tax return.  At this point I wouldn't bother amending your 2008 tax return.  I hear the IRS is pretty backed up on amended returns for some reason and you just might get your refund faster if you claim the credit with your 2009 tax return.  Just file early.

The tax credit is for 10% of the purchase price of the home. The maximum credit for first time home buyers is $8,000.  The maximum credit for long term residents is $6,500.

The New Home Buyers Tax Credit is fully refundable.  That means that you will get the full credit, even if you don't owe any taxes.  That is a very good thing!