Claim Your Piece of the Tax Credit Pie

There is great news for those of you who did not take advantage of the $8,000 tax credit previously offered first time home buyers! It is back by popular demand with a few new features. According to the Internal Revenue Service, more than 1.5 million claims were processed from individuals and families who have purchased a home between January and September 2009, The analysts estimate that more than two-thirds of all current homeowners and nearly all first-time buyers will be eligible for the credit extension. Let's take a closer look at how the government sliced the new pie.

Who Qualifies
For first time home buyers purchasing a new or resale home as a principal residence you must not have owned a principal residence 3 years prior to the new purchase. For married couples there is a catch. If one spouse has owned a home within the 3 years prior to the purchase, neither spouse can qualify. However, unmarried joint purchasers can allocate the credit to any buyer who qualifies.
(ex. Mother and son) Note: The credit does not apply to vacation homes or rental property.

Longtime Homeowners
Previously only first time buyers could qualify for the tax credit. Now the program has been expanded to include longtime homeowners receiving a tax credit up to $6,500 (up to $3,250 for married filing separately) for the purchase of a new principal residence. To qualify the homeowner must have lived in the same principal residence for any 5 consecutive year period that ended on the date the replacement home is purchased.

New Deadline
The deadline has been extended to qualifying purchases made After November 6, 2009 through April 30, 2010. The contracts must be binding by April 30, 2010 with purchases completed by June 30, 2010.

Military Members
The tax credit has also been expanded to allow members of the military and certain other federal employees serving outside of the U. S. an additional year to claim the credit.

Qualifying Income Increase
For purchases made after November 6, 2009 and by April 30, 2010 the income limits have been increased to a modified adjusted gross income between $125,000 and $145,000 for single buyers or an (MAGI) between $225,000 and $245,000 for married couples qualifying for the full tax credit. The increased income limit is not retroactive to purchases made prior to November 6, 2009.

How to Claim the Credit
To claim the credit you must file form 5405 with your original or amended tax return.

The credit does not require repayment unless the home is sold or is no longer the buyer’s principal residence within 3 years after the purchase.

New Restrictions

*A purchaser must be at least 18 years of age on the date of purchase.
*The credit cannot be claimed if the purchase price of the home is more than $800,000.
*Dependents are not eligible to claim the credit.

For more information on how to take advantage of the tax credit you should consult with your Accountant or tax preparer or visit www.irs.gov.