First time home buyer tax credit extended to April 2010
The U.S. Congress took steps to help first time home buyers by extending the tax credit for buying a home which simultaneously gave a boost to the ailing real estate industry.
The law signed by President Barack Obama extends the $8.000 first time home buyer tax credit until April 30, 2010. However, this does not mean the buying transaction has to be closed by this date, buyers with a binding contract prior to April 30, have another 60 days to close the deal and still benefit from the tax credit.
A first time home buyer is defined as one who has not owned a primary residence during the three years up to the date of purchase.
The first time home buyer tax credit was set to expire November 30, 2009.
The law also expands the tax credit to more families. Previously the credit phased out for individuals with income starting at $75,000 and for joint filers with income starting at $150,000, but now the tax credit phases out for individuals with income above $125,000 and for joint filers with income above $225,000.
The law adds another tax break for homeowners, which was not previously available - a $6,500 credit to home buyers who have lived in their current residence for five years or more. This is termed by the IRS as the "long time resident” credit for those who do not qualify as “first time home buyers.” To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight year period ending on the date of purchase of a new home as a primary residence.
The tax credit is available for the purchase of principal residences with a purchase price of up to $800,000.
The IRS says some 1.4 million people applied for the home buyers credit through August.
Military service members get tax benefits
The law also helps service members take full advantage of these home buyer initiatives by ensuring that military personnel selling a home that has declined in value are exempt from tax and extending for one year, to April 30, 2011, the deadline for taking advantage of the first time home buyer tax credit for qualifying service members, so that service members stationed overseas can take advantage of the credit when they return.
The law also ensures that service members will not have to repay the first time home buyer credit if they are ordered to deploy to a different location and, as a result, forced to sell their home within three years.
To combat abuse, the law requires
- taxpayers to include documentation to prove that they purchased a home
- minimum age of 18 to claim the credit
- IRS to look at prior year returns and determine if a taxpayer is eligible for the credit