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REALTOR® Tools & Resources for the Federal Homebuyer Tax Credits: First-time Buyers and Current Owners
Helpful Links: |
Bringing the Dream of Homeownership Within Reach
As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed new legislation that:
- Extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010.
- Expands the credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010.
Here is more information about how the Extended Home Buyer Tax Credit can help prospective home buyers become part of the American dream. If you have specific questions or need additional information, please contact a tax professional or the Internal Revenue Service at 800-829-1040.
Who Qualifies for the Extended Credit?
First-Time Homebuyers. Any person who has not owned a principal residence in the past 3 years may qualify as a First-time homebuyer, subject to income restrictions (see below). Home purchase must be between November 7, 2009 and April 30, 2010.
Long-Time Residents of Same Principal Residence. Someone who has owned a home and occupied it as the principal residence for any consecutive 5-year period during the last 8 years may also be eligible for a credit, also subject to the new income ceilings. This does include current homeowners, so long as the home was both owned and occupied by the taxpayer for at least 5 consecutive years. Home purchase must be between November 7, 2009 and April 30, 2010.
If you or your client purchased a home between January 1, 2009 and November 6, 2009, please see: 2009 First-Time Home Buyer Tax Credit.
What are the new maximum income levels?
- 1st-Time Homebuyers. The Modified Adjusted Gross Income limit is now $125k for singles, $225k for couples.
- Long-Time Residents of Same Principal Residence. Same: $125k for singles, $225k for couples.
“Modified Adjusted Gross Income” (MAGI) is defined by the IRS. To find it, a taxpayer must first determine "Adjusted Gross Income" (AGI). AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.
To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs. Singles cannot make more than $125,000 in MAGI, and married couples cannot make not more $225,000 in order to get the maximum credit. Partial credit is available for those with MAGI between $125k to $145k ($225k-$245k for joint filers).
Which Properties Are Eligible?
The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.
How Much Is Available?
- The maximum allowable credit for first-time home buyers is $8,000.
- The maximum allowable credit for current homeowners is $6,500.
How is a Buyer's Credit Amount Determined?
Each home buyer’s tax credit is determined by two additional factors:
- The price of the home.
- The buyer's income.
Price
Under the Extended Home Buyer Tax Credit, credit may only be awarded on homes purchased for $800,000 or less.
Buyer Income
Under the Extended Home Buyer Tax Credit, which is effective on November 7, 2009, single buyers with incomes up to $125,000 and married couples with incomes up to $225,000—may receive the maximum tax credit.
These income limits have changed from the 2009 First-Time Home Buyer Tax Credit limits. If you or your client purchased a home between January 1, 2009 and November 6, 2009, please see 2009 First-Time Home Buyer Tax Credit. (link to http://www.realtor.org/wps/wcm/connect/RO-Content/ro/home_buyers_and_sellers/first_time_home_buyer_tax_credit_2009_info)
If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?
Yes, some buyers may still be eligible for the credit.
The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $145,000 for singles and over $245,000 for couples are not eligible for the credit.
Can a Buyer Still Qualify If He/She Closes After April 30, 2010?
Under the Extended Home Buyer Tax Credit, 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.
Will the Tax Credit Need to Be Repaid?
No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale.
