It's Official - Tax Credit Is Extended

It’s official. President Obama has signed a bill that extends the tax credit for first-time home buyers into the first half of 2010. In addition, the extension also opens up opportunities for others who are not buying a home for the first time.

Tax Credit For Home Buyers
First-time home buyers (people who have not owned a home with the past three years) may be eligible for the tax credit. The credit for first-timers is 10% of the purchase price of the home, with a maximum available credit of $8,000. Single taxpayers and married couples filing joint return may qualify for the full tax credit amount.

What Are The New Deadlines?
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010

Tax Credit Versus Tax Deduction
It's important to remember that the tax credit is just that...a credit. The benefits of a tax credit is that it's a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a first-time buyer were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000, they would owe nothing.

Better still, the tax credit is refundable, which means the buyer can receive a check for the credit if they have little income tax liability. For example, if a first-time buyer is eligible for the $8,000 but is liable for $4,000 in income tax, a check for the remaining $4,000 would still be received.

Higher Income Caps
The amount of income someone can earn and qualify for the full amount of credit has been increased. Single tax filers who earn up to $125,00 are eligible for the total credit amount. Those who earn more than this gap can receive partial credit. However, if the taxpayer earns $145,000 or more, they are ineligible for any tax credit. Joint filers can earn up to $225,000 combined for the total tax credit. If the joint filer is up to $245,000 in combine salary they can receive partial credit. Any more earnings than $245,000 and they are not eligible for any tax credit.

Maximum Purchase Price
Qualifying buyers may purchase a property with a maximum sales price of $800,000.