How to Qualify for Homebuyer Tax Credits

First-time homebuyers who’d expected the $8,000 tax credit to expire last November 30 should be aware that it has been extended to mid-2010.

The catch is that the borrower must close on the home before April 30, 2010. If you are unable to close on the property by that date, you must have a fully executable sales contract and close by June 30, 2010, to remain eligible.

First-time homebuyers are those who have had no ownership in a primary residence in the last three years. This group includes owners of rental properties who haven’t owned a primary residence in the last three years.

The maximum income for a single filer is $125,000, and $225,000 for married filers. First-timers who have non-occupying co-borrowers on the loan with them are still eligible. The tax credit is set at a maximum of $8,000, or 10% of the purchase price, whichever is less. If you purchase a home for $60,000, you are eligible for a $6,000 credit. If you purchase a home for $400,000, you are still eligible for only $8,000.

Properties must be primary residences, meaning that the credit excludes second homes and rental properties. You must own the property for at least 36 months, or else you forfeit all or part of the tax credit.

Existing homeowners who are moving into a new primary residence and have owned a primary residence for at least five of the last eight years are eligible to receive a $6,500 tax credit. Please contact your tax professional for more details.