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The popular $8,000 tax credit for first-time homebuyers, which was set to expire at the end of June 2010, was extended to September 30, 2010. The Worker, Homeownership and Business Assistance Act of 2009 even benefited current homeowners by including a $6,500 tax credit for “repeat” homebuyers—individuals who already owned a home but wanted to buy a new (replacement) home as their principal residence.
Paying Back the 2008 Credit
If you purchased your home and claimed the credit in 2008, you need to begin repaying the credit when you file your 2010 tax return. Find instructions for repaying here.
Claiming the 2009 and 2010 Credit
If you expect to claim the credit—which equals 10 percent of the purchase price of the home, up to the $8,000 or $6,500 limits—on your 2010 tax return, keep these points in mind:
- Most likely, if you meet the following criteria, you will not have to repay the tax credit if you purchased your home in 2009 or 2010.
- To be eligible for the credit, the purchase must have occurred on or before April 30, 2010, and the closing must have been completed by September 30, 2010.
- Be sure you fit the Internal Revenue Service’s definition of first-time homebuyer: “You are considered to be a first-time homebuyer if you, and your spouse if you are married, did not own any other main home during the three-year period ending on the date of purchase.”
- Be aware of income limits. For home purchases made after Nov. 6, 2009, if you were single, you could earn up to $125,000 and claim the credit. If you were married and filed a joint return, together you could earn up to $225,000. If you earned more than these amounts, you may qualify for a reduced credit if your income is between certain ranges. For a married couple filing a joint return, the phase-out range was $225,000 to $245,000. For other taxpayers, the phase-out range was $125,000 to $145,000.
- If you bought a home priced at $800,000 or more, you do not qualify for the tax credit.
- The house must be your principal residence—no credits are given for second homes or vacation homes.
- The home cannot have been purchased from a close relative, including a spouse, parent, child, grandparent or grandchild.
- To qualify for the $6,500 replacement home credit, you didn’t have to buy “bigger,” but you must have owned your current home for at least five years.
Extension for Military Families
If you are in the military, you have an additional year to buy a home and qualify for the credit. You must enter into a binding contract to buy a principal residence on or before April 30, 2011 and close by June 30, 2011. Watch this IRS YouTube video to learn more.
To learn more about the expanded homebuyer tax credit, visit these IRS Web pages:
First-Time Homebuyer Credit
First-Time Homebuyer Credit Questions and Answers: Basic Information
First-Time Homebuyer Credit Questions and Answers: Homes Purchased in 2008
First-Time Homebuyer Credit Questions and Answers: Homes Purchased in 2009 or 2010
First-Time Homebuyer Credit: Scenarios
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