First-Time Home Buyer & Replacement Home Purchase Tax Credits

The date for the federal tax credit for new home purchases has been extended! For those who purchase a primary residence for the first time before May 1, 2010, there is a potential refundable* tax credit of up to $8,000 if the following conditions are met:

• The home purchased must be the first principal residence owned, or at least the first principal residence owned over the last 3 years, for either the taxpayer or spouse
• Adjust gross income (AGI) must be less than $145,000 for single filers and less than $245,000 for joint filers
• The credit is phased out (or reduced) between AGI of $125,000 and $145,000 for single filers, $225,000 and $245,000 for joint filers
• If a binding contract is written before May 1, 2010, the purchaser has until July 1, 2010 to close and still qualify for the credit.

There is also now a provision that allows for a tax credit of up to $6,500 for individuals and married couples who have owned a home as their principal residence for 5 consecutive years within the last 8 years and purchase a new home as their principal residence after November 6, 2009 and before May 1, 2010. The same AGI rules listed above apply.

If the home is sold or ceases to be the taxpayers' principal residence within the first 36 months, the credit amount will become due in full to the extent that the gain on the sale of the home is equal to or greater than the credit received.

*A refundable tax credit means the taxpayer receives a refund even if there was no tax liability for the tax year