The homebuyer tax credit has undergone so many alterations that many people are no longer sure which homes and taxpayers qualify for it. Since it has been extended and expanded for a limited time, it's important that its newest provisions are understood even before the IRS releases the forms to claim it.

Important Tax Credit Updates

The expanded version of the credit is not limited to first-time buyers, although there is still a credit of up to $8,000 offered to first-time buyers. Now there is also a credit for "long-time residents" who buy a new home, up to $6,500.  Both credits have been extended through April 30, 2010.

Information for First-time Buyers

The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.

For sales after November 6, 2009, income limits of $125,000 for single taxpayers and $225,000 for married couples filing joint income tax returns has been established.

Information for Long-time Residents

Long-time residents who buy a replacement main home may now qualify for up to a $6,500 tax credit. To qualify, you must have lived in your former home for at least five consecutive years out of the eight years immediately prior to buying the new home. The purchase may close as late as June 30, 2010 but a binding purchase agreement must be entered into no later than April 30, 2010. Income limits are the same as for first-time buyers. Since this is a new credit, you must use the 2009 or 2010 Form 5405 to claim it. The 2009 version will not be released by the IRS until late December or early January.

Tax Form Details

If you are required to use the 2009 version of Form 5405 for either of these credits, you will not be able to file your tax return electronically because the form will be released too late to include it in 2009 e-file software. The required purchase dates are extended a full year for members of the armed forces and certain diplomatic and intelligence personnel on foreign duty.

By Cheri Dohnal
Photo: © Dmitriy Yakovlev - Dreamstime