First-Time Homebuyer Credit: More Details on the Extension

The First-Time Homebuyer Credit was expanded by The Worker, Homeownership and Business Assistance Act of 2009. The new law extends the deadlines for purchasing and closing on a home and allows current homeowners to buy a new home as a replacement residence.

Time Extension: An eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010.

Claiming the Credit:For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.

Not Just for Property Virgins: For the first time, long-time homeowners who buy a replacement principal residence may also claim a homebuyer credit of up to $6,500 (up to $3,250 for a married individual filing separately). They must have lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the replacement home is purchased.

Higher Incomes Not Excluded: People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after Nov. 6, 2009.

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The credit phases out for individual taxpayers with modified adjusted gross income (MAGI) between $125,000 and $145,000 or between $225,000 and $245,000 for joint filers.

Several new restrictions apply to homes purchased after Nov. 6, 2009.

- Purchasers must attach a properly executed settlement statement to their return.
- No credit is available if the purchase price of the home exceeds $800,000.
- The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement.
- A dependent is not eligible for the credit.
- The new law gives the IRS broader authority to deny first-time homebuyer credit claims, without having to first audit a taxpayer’s return. Be careful!

Now that you know it's not too late, get out there and start looking for the right home for you. We don't know if this credit will be extended again, so now is the time to act.