Tax Credit for New Home Buyers

President Barack Obama signed the Worker, Homeownership, and Business Assistance Act of 2009 which extended the first time home buyer tax credit.

Prospective home buyers now have until June 30, 2010 to close on a qualifying home purchase (a binding contract must be entered into on or before April 30, 2010).

Home Buyer Tax Credit Extension

First time home buyers may still receive up to $8,000 (or 10% of the home’s purchase price). The act now opens up a $6,500 credit to existing homeowners in addition to extending the existing $8,000 first time home buyer tax credit.

Tax Credits for Home Buyers

Upon enactment of H.R. 3548, income limitations for the home buyer tax credit became less stringent, meaning more taxpayers may qualify for the a credit. Under the rules that existed prior to November 6, 2009, eligibility was phased out between modified adjusted gross incomes of $75,000 to $95,000 ($150,000 to $170,000 for married filing jointly). Under the new rules, eligibility is phased out between modified adjusted gross incomes of $125,000 to $145,000 ($225,000 to $245,000 for married filing jointly).

Now, there is also a purchase price limit. For homes that cost more than $800,000, no credit may be claimed on the purchase. The new rules also set an age limitation. Home buyers must be 18 years old by the closing date.

Finally, the new rules also establish a proof of purchase requirement. For purchases made after November 6, 2009, taxpayers must provide proof of purchase by attaching a properly executed settlement statement to their tax return.

Who Qualifies for Enhanced Obama Economic Stimulus Incentive

To qualify for the $6,500 federal tax credit ($3,250 for married individuals filing separately), long-time homeowners must have lived in their primary residence for five consecutive years out of the past eight years. The end of the eight year period is marked by the closing date of the new home purchase.

 Deadlines for First Time Home Buyer Credit 

Taxpayers who want to take advantage of the extended $8,000 home purchase incentive or the new $6,500 tax credit for home buyers should note the important deadlines in April and June 2010 mentioned above.