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Home Buyer Tax Credit Extension

The home buyer tax credit was introduced by the federal government to stimulate activity in the housing market. It provided $6,500 to repeat home buyers and up to $8,000 for first time home buyers. This initiative has been a huge success, but many people have been unable to sort out their house purchase in time to meet the June 2010 deadline. The federal government has responded to this by providing a home buyer tax credit extension lengthening the deadline until 30th of September 2010.

What Does This New Credit Extension Mean?

Unfortunately this new extension does not mean that you can now start looking for a home and hope to benefit from the tax incentive; the only exception being people serving in the military. In order for you to qualify for the tax credit you will need to have already made a binding contract before April 30th 2010. If you have not signed a contract until after this time you won’t be entitled to the credit.

Who Can Claim the Home Buyer Tax Credit?

  • If you have signed a binding housing contract prior to April 30th.

For the First Time Home Buyer Tax Credit

  • You are a first time buyer; this means that you haven’t owned a permanent residence within the last three years. A permanent residence is defined as being somewhere that you spend most of your time.
  • You are married and neither you nor your partner has owned a permanent residence within the last three years.
  • You are not earning more than $125,000 ($95,000 if the purchase was made prior to November 2009) or a couple earning $225,000 ( or $150,000 if prior to November 2009).
  • If you own a home but have not lived in it for five consecutive years out of the last eight then you might still qualify for this credit.
  • The house should not cost more than $800,000.

For the Repeat Home Buyer

  • If you have lived in a home for five consecutive years of the last eight years. In the case of a couple both will need to meet the requirements for a repeat home buyer (i.e. both will need to have lived in the home they own for five consecutive years of the last eight).
  • The house does not cost more than $800,000.
  • The tax limit is $125,000 for a single person and $225,000 for a couple who file a single return.

How to Claim Your Home Buyer Tax Credit

The process for claiming the home buyer tax credit and first time home buyers credit is more or less the same. The application has to be done by paper as there is no electronic application available; care needs to be taken when filling out the form to ensure that there are not going to be any unnecessary delays. Both types of home buyer tax credit applications are made using the same form; the IRS 5405.

Claiming this tax credit incentive will help you deal with the financial burden of getting a home for the first time and moving somewhere new. It is worth pointing out though, that if you sell your home within three years of this tax credit you will be obliged to give the money back to the Federal government. It is important to keep this in mind if you intend to buy something with the intention of selling it again in the near future.