Many people are hoping they'll qualify for the expanded home buyer credit. (Photo: iStockphoto)
Last week, President Barack Obama signed the “Worker, Homeownership, and Business Assistance Act of 2009,” which extends the $8,000 tax credit available to “first-time” home buyers and adds a tax credit of up to $6,500 for repeat or move-up buyers. The tax credits are
available to those who purchase a primary home, and aren’t available to buyers of investment or vacation homes.
For those of you who don’t know how a tax credit works, a credit can reduce the amount of tax you owe. For example, if you owe $6,000 in income taxes, and qualify for the full $8,000 tax credit, you may be able to get $2,000 back. Under the new regulations, home buyers are eligible for a tax credit of 10 percent of their home’s purchase price.
Wondering if you qualify of the credit under the new regulations? Read on:
-- Buyers who qualify: “First-time” and “repeat” home buyers are eligible. First-time home buyers must not have owned a primary home during the last three years before a home purchase. Repeat home buyers who may qualify are current primary-home owners who have lived in their principal residence for five consecutive years out of the last eight before a home purchase.
-- Time period: Under the new tax credit act, home buyers who purchase a home between Nov. 6, 2009 and before May 1, 2010 are eligible. But, if you sign a binding sales contract for a home by April 30, 2010, you have until July 1, 2010 to close on a home.
-- Income restrictions: There’s a cap at $125,000 for single taxpayers and $225,000 for married taxpayers for both tax credits. However, homeowners who earn more than these income limits may be able to qualify for partial tax credits. (See the explanation from Robert D. Dietz, assistant vice president for tax and policy issues at the National Association of Home Builders, of how these income limits work in a recent New York Times interview.)
However, buyers who want to take an advantage of the recently approved tax-credit extension should act quickly. The extension is a short one, giving home shoppers only five extra months over the last deadline to shop for, purchase and close on a home. That’s not a lot of time when it comes to the home-buying process.—Lauren Baier Kim