Update! The President has extended the deadline until September 30, 2010 for those homebuyers who have a contract on a home but have not closed on the loan yet.
A tax credit in the amount of a maximum of $8,000 for new homebuyers and a maximum of $6,500 for existing homeowners who have owned their home for 5 years of more has been enacted by Congress and the Obama Administration. This tax credit has proved so popular and has served to stimulate the housing market during the recession that it was extended until the end of June, 2010 and offered to existing homebuyers. Income levels were also raised to make the tax credit available to more people.
First-time Homebuyers
To qualify as a first-time homebuyer, you must not have owned a home for the last three years. Further, you must have purchased a home during 2009. If the $8,000 credit more than offsets what you owe the IRS, you will receive a refund.
You can also claim the tax credit on your 2008 return if you filed your 2008 taxes before you purchased your house. All you have to do is file an amended tax return on IRS Form 1040X for 2008. Handling the tax credit in this way virtually guarantees you a refund. Take note that you can't sell the house for three years or you will have to repay the refund.
Existing Homeowners
A $6,500 tax credit is available to existing homeowners if they buy a home to use as their principal residence by April 30, 2010 and close on that home by the end of June, 2010. The homeowner must have lived in the same home for five consecutive years.
If a home costs more than $800,000, it is not eligible for the tax credit.
In order to claim the tax credit on your income taxes, you need to file IRS Form 5405.
Income Levels to Qualify for the Tax Credit
If you file as single or head of household, you get the full tax credit if your modified adjusted gross income is less than $125,000. Married couples filing jointly get the full tax credit if their modified adjusted gross income is less than $225,000.
Single taxpayers or those who file as head of household get a partial tax credit if they earn between $125,000 and $145,000. Married couples filing jointly earning between $225,000 and $245,000 also get the partial credit.
