Details, Questions and Answers About The

Homebuyer Tax Credit Extension

(effective November 7, 2009)

  • 1) What Are The NEW TAX CREDITS For Homebuyers?
    First-Time Homebuyers (FTHB’s): FTHB’s (defined as people who
    have not owned a home within the last 3 years) may be eligible
    for the tax credit. The credit for FTHB’s is 10% of the purchase
    price of the home, with a maximum credit of $8,000. Single tax-
    payers and married couples filing a joint return may qualify for
    the full tax credit; married filing separate qualify for $4,000.

    Current Owners: For those who have owned and used the home
    being sold as their principal residence consecutively for 5 of the
    previous 8 years, they may qualify for a tax credit of up to $6,500;
    married filing separate qualify for $3250.

  • 2) What Are The NEW DEADLINE DATES?
    In order to qualify for the tax credit, a written binding contract to
    purchase must be in effect no later than April 30, 2010 and the
    purchaser will have until July 1, 2010 to close.

  • 3) TAX CREDIT And Tax Deduction – What’s The Difference?
    The great news is that a TAX CREDIT is exactly that……..a tax credit.
    This means that it is a dollar-for-dollar reduction in the tax owed
    rather than just a reduction in the tax liability. So, as a tax credit,
    if a first-time homebuyer was to have owed $8,000 in income taxes
    and they were to qualify for the tax credit of $8,000 they would owe
    nothing! (Compare this to a reduction in the tax liability whereby
    they would only save $1000 to $1500 when all was said and done.)

    And, better still, the tax credit is refundable, meaning the homebuyer
    can receive a check for the credit if they have little income tax liability.
    For example, if a first-time homebuyer is eligible for the full tax credit
    of $8,000, yet is only liable for $5,000 in income tax, they can still
    receive a check for the $3,000 difference!

  • 4) What Are The NEW INCOME CAPS?
    Single tax filers can earn up to $125,000 and be eligible for the total
    tax credit. Married tax filers, filing jointly, can earn up to $225,000.
    Those who earn more than these caps can receive a partial credit
    based on an additional $20,000 phase out schedule. Single filers who
    make more than $145,000, and joint filers who make more than
    $245,000 are not eligible for any tax credit.

  • 5) Is There a LIMIT ON THE COST of The Home Being Purchased?
    Qualifying buyers may purchase a property with a maximum sale price
    of $800,000. This is an absolute ceiling so therefore if the purchase
    price is ANY amount over this ceiling, the purchase is ineligible for any
    portion of the tax credit.

  • 6) For CURRENT OWNERS To Obtain A Credit, Must The New Home
    Cost More Than Their Old Home?
    No. For example, those who are moving from a high cost area to a
    lower cost area, or those who are simply downsizing, and meet all
    eligibility requirements will qualify for the $6,500 credit.

  • 7) What Types of Properties Are Eligible?
    Eligible primary residences include single-family homes, townhomes,
    condos and co-ops.

  • 8) What If I Owned a Home For 8 Years, But Sold It 2 Years Ago and
    Have Been Renting Since.     If I Purchase A Home Will I Be Eligible
    For the $6,500 Tax Credit If I Meet All The Other Requirements?
    YES, because you lived in the home for more than 5 consecutive years
    of the previous 8 years, you will qualify for the credit. At the time of
    this posting, it appears that whether a homebuyer has been renting or
    bought in the interim, they would be eligible because they owned a
    home and occupied it as their principal residence for 5 consecutive years
    out of the last 8 years. The key word is “consecutive”, therefore as long
    as they lived in that home for 5 straight years what was done in the sale
    doesn’t affect eligibility. Please contact a tax professional or the Internal
    Revenue Service at 800-829-1040 for an up-to-date clarification of this.

  • 9) Will The Tax Credit Have To Be Repaid?
    That depends. No, the buyer does not need to repay the tax credit, if he/she
    occupies the home for three years or more. However, if the property is sold
    during this three-year period, the full amount credit will be recouped upon sale.

  • 10) What Documentation Is Needed To Obtain The Tax Credit?
    The purchaser must attach documentation of the purchase to their tax return.
    This would typically be the HUD Settlement Statement signed at closing.

DISCLAIMER: Information provided herein is believed accurate based on early interpretations of the governing
legislation. Those relying on this information are advised to contact their tax professional or the Internal Revenue
Service at 1-800-829-1040 for clarification or confirmation of this information.