Update to Home Buyer Tax Credit

What You need to know if you are buying a home

Congress passed an expanded version of the $8,000 first time home buyer tax credit that was set to expire on November 30. This expanded version will likely stimulate the housing market more than the old version will.

Not only does this recently passed credit still includes $8,000 credit to first time buyers, but includes a $6,500 tax credit for home buyers that have lived in their current primary residence for at least five consecutive years out of the past eight years.

Tax credit applies to homes purchased for less than $800,000 before May 1, 2010. If you sign a contract before May 1st, you need to close before July 1, 2010.

There is an income limitation for single tax payers went up from $75,000 under the old version to $125,000 for the new version. Married tax payers income limit is $225,000, an increase of $75,000.

Example 1: Jane purchased a home in 2002, lived there for 5 years as her primary home, moved out in 2007, and turned that home into a rental property.  If Jane decides to buy a new primary residence today, she would qualify for the $6,500 tax credit based on the fact that she lived in the same residence as her primary home for at least five consecutive years out of the past eight.

Example 2: Nicole purchased a home in 2006, and lived there for the past 3 years as her primary home.  If Nicole decides to buy a new primary residence today, she would not qualify for the $6,500 tax credit based on the fact that she did not live in the same residence as her primary home for at least five consecutive years out of the past eight.