An Overview of the Extended Tax Credit

Questions about the tax credit? Contact a one of LSB's Mortgage Professionals, or a Licensed Agent with CENTURY 21 LSB Real Estate.

November 10, 2009 -- President Obama recently signed a bill that extends the tax credit for first-time homebuyers into the first half of 2010. The bill also opens up opportunities for others who are not first-time home buyers.

Below is a brief overview of the new bill.  If you are curious how this may affect your specific situation, consult your accountant or tax advisor for further details.

Who Gets What?

First-Time Homebuyers: First-time homebuyers (people who have not owned a home within the last three years) may be eligible for the tax credit. The credit is 10% of the purchase price of the home, with a maximum available credit of $8,000.  Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit program now gives those who already own a residence a tax credit of up to $6,500 for qualified purchasers.  They must have owned and occupied a primary residence for a period of five consecutive years during the last eight years.  Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

The amount of income someone can earn and qualify for the full amount of the credit has been increased.  Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Qualifying buyers may purchase a property with a maximum sale price of $800,000.

What is a tax credit?

A tax credit is a direct reduction in tax liability owed to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual's primary residence.