Tax Credit Extended for First Time Home Buyers

Great tax professionals always keep a watchful eye on the actions of Congress and the IRS, many of which may affect your tax filings. A prime example is the extension and expansion of the first-time homebuyers tax credit President Obama signed in November of 2009, which was scheduled to lapse on December 1. The $8,000 credit will now be in effect through the end of June 2010.

The date for qualifying purchases has been extended to April 30, 2010 with an additional two-month period allotted to close on the purchase (until June 30, 2010). Limits on income were also raised, with single buyers able to earn a maximum of $125,000 and married couples able to earn $225,000.

The act has also been expanded to allow a tax $6,500 credit for existing homeowners. In order to qualify, you must have lived in your present home as your principal residence for five consecutive years during the past eight years. If you purchase a home in 2010 you will be able to claim the credit on either your 2009 or 2010 tax return, and you do not have to repay the credit unless you sell the home within 36 months.

There is also good news for military personnel in the act. Those personnel who have extended duty service outside of the US for at least 90 days from 12/31/08 - 5/1/2010 will have the first time homebuyers credit extended another year until April 30, 2011.

With more people qualifying under the new rules, it is hoped that the revised version of the tax credit will stimulate the housing market more than the original version by boosting both home sales and prices.

While the homebuyer credit is very beneficial, it is also quite complex, with repayment rules, documentation requirements, a cap on purchase prices and more. Taxpayers are urged to meet with their tax professionals for end-of-the-year planning. Doing so now can reduce your tax liability and save you money on both state and federal taxes. Expert tax advice is especially necessary when it comes to navigating the ins and outs of this newly expanded homebuyer credit.

About the Author

Mitchel's Bookkeeping & Tax Service, LLP has successfully helped thousands of Americans with their tax preparation, accounting, and bookkeeping needs since 1982. Gary Schenk and Marjorie Long have worked together for over twenty years, dedicating themselves to the care and concern of their clients in the Cherry Hill, Marlton and surrounding Southern New Jersey and Greater Philadelphia regions, as well as nationally. For more information, visit their website at http://www.mitchels.com.