Home Buyer Tax Credit: Not Just for Home Buying Virgins Anymore

Want to Save Thousands on Your New Home Purchase?

The First Time Home Buyers tax credit law was just recently extended through May 1, 2010. The part of the new law that has been under-reported is that the new law extends tax credit to those who are veterans of home buying.

The first time home buyer tax credits basically remain the same as the one that was supposed to have expired November 30, 2009. It provides first time home buyers with an eight thousand dollar tax credit on the purchase of a qualifying home. The rules for repeat buyers are a little different-so read on to get the details.

Here is a quick review of the pertinent points of the Home Buyer Tax Credit for the first time home buyer:

• Up to 10% tax credit on the purchase price of a new home-maxing out at $8,000.00

• Must not have owned a home for at least the three years before the qualifying purchase.

• If a couple, both individuals must meet above criteria.

• They must live in the new home for three years as their principal residence.

• You cannot purchase the home from a parent, grandparent or your children.

• If your tax credit is above your tax liability, you may receive a refund check for the balance. (If you qualify for 8,000 dollar credit and your tax bill is 4,000, you may receive a refund in cash for the balance.

• Home purchase price is capped at $800,000.

The pertinent points for repeat home buyers:

• Must have been living in one residence for five of the last eight years.

• The tax credit is up to 10% of the purchase price, but is capped at $6,500 for repeat buyers.

• Married couples modified income limit begins to phase out at $225,000 and is capped at $245,000.

• No retroactivity- Must purchase between November 6, 2009 and close before July 1, 2010 with a contract in hand before May 1, 2010.

To qualify for both first and repeat buyers credits you must provide proof of purchase-usually a HUD-1 form with your tax return. Your new home does not have to be a detached single family home, but you do have to live there as your principal dwelling-and proof of occupancy may be required if you get audited.

So for those of you who thought the gravy train of a large tax credit was over, this gives you new life to find that qualifying new home-go forth and do your part for the real estate community and buy a new home-but only buy what you can afford. That tax credit will be of no benefit to you in a year or two if you are struggling to make your payment. The F-word (foreclosure) is no fun, and that new home can become a burden instead of your new castle.