The Extended Tax Credit: What it Means

Everyone knows by now that Congress and the President passed an extension to the first time home buyer tax credits that were due to expire at the end of November. Now the questions are rolling in as to how to best take advantage of the new credits.

The measure continues giving an $8,000 tax credit to first-time buyers and now provides a $6,500 tax break to qualified homeowners looking to move up to middle-market homes that cost no more than $800,000.

In addition, the legislation raised the qualifying income levels to $125,000 for individual income tax filers and to $225,000 for joint filers.

For homeowners looking to move up, the legislation would require that they have lived in their current house for five consecutive years out of the last eight.

So you’ve decided to purchase a home and take advantage of the Extended Home Buyer Tax Credit.  Here’s what you have to do to get your benefit:

Close on your home purchase between November 7, 2009 and April 30, 2010, or have a binding written contract by April 30, 2010 and close by July 1, 2010.

Decide whether to: 
apply the credit to your 2009 tax return, filed on or before April 15, 2010;
file an amended 2009 return; or,
apply the credit on your 2010 return, filed on or before April 15, 2011.

Attach documentation of purchase to your return.

If you have questions about the home buyer tax credits that we have not covered on this site or in this article, use the comment link below and ask us anything you need to know. Your email address, while needed to post a comment (for purposes of filtering out spammers) is never published on this site with your comments. We’d love to hear from you.