Expanded First-Time Homebuyer Credit

The first-time homebuyer credit has been extended and is now also available for long-time homeowners. This is currently one of the most generous tax breaks for individuals.

Here’s how it works for a first-time homebuyer: a first-time homebuyer is eligible for a credit of $8,000 if they purchase a principal residence before April 30, 2010 and close before June 30, 2010. In order to qualify for the full credit amount, your modified adjusted gross income cannot exceed $125,000 or $225,000 for married couples filing jointly. The full phase-out amounts are $145,000 or $245,000 for married couples filing jointly to receive a partial credit. This is an increase to the original income limitations of $75,000 or $150,000 for joint filers.

For long-time homeowners: after November 6, 2009, long-time homeowners are eligible for a credit of $6,500 if they have lived in the same principal residence for any five-consecutive year period during the period that ended on the date the new home is purchased. The same income limitations apply.

Along with the new law there are also some newer restrictions. The credit is disallowed if the purchase price exceeds $800,000, you must be at least 18 years old on the date of purchase, and a dependent is not eligible for the credit. Since this credit is so generous and fraudulent returns have been filed, the IRS now requires a settlement statement to be attached to the return. The IRS also has the authority to deny the credit without having to audit your return.