Extended Homebuyer Tax Credit Program Questions/Answers

Helpful real estate advice brought to you as a public service by Coldwell Banker Select Professionals and the Lancaster County Association of Realtors®.

We’ve been getting a lot of questions lately about the Extended Homebuyer Tax Credit program which ends on April 30, 2010. In addition to first-time homebuyers, the extended credit program is also available to current homeowners who meet the criteria. Read on and if you have other questions please call us at 717-569-0608 to speak with a REALTOR®.

What is the program?
The Worker, Homeownership, and Business Assistance Act of 2009 extended the tax credit of up to $8,000 for qualified first-time home buyers AND also authorized a tax credit of up to $6,500 for qualified repeat home buyers.

Who qualifies for the extended credit?
First-time home buyers who purchase a home by April 30, 2010 are eligible. To qualify as a “first-time home buyer,” you or your spouse may not have owned a residence during the three years prior to the purchase.

Current home owners purchasing a home by April 30, 2010 who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight are also eligible.

What kinds of properties are eligible?
The Extended Home Buyer Tax Credit may be applied to primary residences, including single-family homes, condos, townhomes, and co-ops, purchased for $800,000 or less.

How is the amount of the tax credit determined? 
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000/$6,500.

What is the income limit?
According to the IRS, the full credit is available to single buyers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers. Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify. See IRS Form 5405 for more details.

Can you still qualify if you close after April 30, 2010?
As long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.

When can the credit be claimed?
For all qualifying purchases in 2010, home buyers have the option of claiming the credit on either their 2009 or 2010 tax returns.

Will the tax credit need to be repaid?
No. You don’t need to repay the tax credit if you live in the home for three years or more. However, if the property is sold during this three-year period, the full amount of the credit will be recouped on the sale.