Extended and Expanded Tax Credits for Home Buyers Approved by Congress

New legislation proposed to extend and expand the first-time home buyer credit was signed into law on November 6, 2009. The new legislation:

1. Extends deadlines for purchasing and closing on a home. Buyers must enter into a binding contract to buy a principal residence on or before April 30, 2010 and close on the home by June 30, 2010 to claim up to $8,000.

2. Expands credits to current homeowners. Homeowners who buy a replacement residence may claim up to $6,500. They must have lived in the same house for any five-consecutive year period during the eight-year period that ended on the date the replacement home is purchased.

3. People with higher incomes can now qualify for the credit. Income limits for homes purchased after Nov. 6, 2009 are between $125,000 and $145,000 or between $225,000 and $245,000 for joint filers.

Several new restrictions apply to homes purchased after Nov. 6, 2009.

• Purchasers must attach a properly executed settlement statement to their return.


• No credit is available if the purchase price of the home exceeds $800,000.


• The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement.

Additionally, there are new benefits for military service members. See my previous post for details. Many of the particulars are the same as for non-service members except that the credit is available for an additional year (April 30, 2011 for contracts and June 30, 2011 to close).

For those who are still looking to buy, this extension provides a chance to breathe and gives buyers an opportunity to take advantage of record low interest rates, low prices, and ample inventory from which to choose. However, transactions are taking longer than ever to close. The tendency at this time of year is to wait until after the holidays or even until Spring to start looking for a home. If your are seriously looking, don't wait if you want to take advantage of tax credits. It takes time to find a home and get into contract, and it could take up to 60 days or more to close after contracts are signed.

If you are a seller, consider putting your house on the market now rather than after the holidays for the same reason. Many experts are predicting increased interest rates in the Spring and it is doubtful that tax credits will be extended again. These factors will contribute to a smaller pool of buyers.

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