Jan 052010

In November, Congress passed an extension and expansion of the homebuyer tax credit. If you’re considering purchasing a home, read the details carefully. This program could put as much as $8,000 in your pocket.

The tax credit is available to both first-time homebuyers (haven’t owned a primary residence in the last 3 years) and so-called “long-time” homebuyers (have lived in the same home for at least 5 consecutive years in the past 8 years). Importantly, a buyer is eligible for the tax credit if he/she uses a co-signer, even if the co-signer is ineligible. (In other words, a parent can co-sign for a child.)

The credit is 10% of the home’s purchase price up to a maximum of $8,000 for first-time homebuyers and $6,500 for long-time homebuyers. The purchase contract must be dated on or before 4/30/10, and the transaction must close on or before 6/30/10. (A special provision extends the date an year for active military personnel.)

The buyer must purchase the home as his/her primary residence, and the maximum purchase price is $800,000. Multi-unit (2 to 4-unit) properties are eligible as are condos, manufactured homes, and new construction.

Income limits apply: $125,000 for single and $225,000 for married. (The credit is available up to $145,000 and $245,000 at a reduced amount.)

Important restrictions include:

  • Buyer must be 18 years or older;
  • Buyer cannot purchase the home from a close relative;
  • Buyer cannot be a non-resident alien; and
  • Buyer cannot purchase the home from a decedent.

The IRS has some okay information in its Web site. You have to poke around a bit. I found the “questions and answers section” particularly helpful.

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