The federal home buyer tax credit has been extended and expanded to allow more home buyers to take advantage of it.
The tax credit, worth up to $8,000, can now be taken by first-time home buyers and current homeowners who sell their home and buy another one. That’s good news for home buyers and homeowners.
Home buyer tax credit up to $8,000 or $6,500
The home buyer tax credit is equal to 10 percent of the purchase price of the home, up to $8,000 for first-time buyers and $6,500 for homeowners who sell their home and buy another one. For example, if you were qualified to take the full first-time home buyer tax credit and you bought a home that cost $275,000, you would be eligible to take a tax credit worth $8,000. The maximum home price is $800,000.
The home buyer tax credit is refundable, which means that if you qualify, you can claim the full amount and get a rebate from the government, even if you owed less than that in federal income tax. For example, if you owed $3,000 in income tax and could claim the full $8,000 tax credit, you would get $5,000 from the government.
Qualifying for the home buyer tax credit
You may be qualified to take the tax credit if neither you nor your spouse has owned a home in the previous three years or you have lived in your current home for at least five consecutive years during the last eight years.
Your new home must be your principal residence, and you can’t buy the home from a close relative such as your spouse, parent, grandparent, child or grandchild if you want to use the tax credit.
New tax credit deadline
The home buyer tax credit was scheduled to end Nov. 30, 2009, but the deadline has been extended until April 30, 2010. If the home you want to buy is under contract or in escrow on that date, you will have another 60 days to close the transaction and still take the tax credit.