In a nutshell:

  • The existing $8,000 tax credit is extended to May 1, 2010. (The credit is for 10% of the home purchase price, up to $8,000.)
  • If a home buyer is “into a written binding contract before May 1, 2010”, and they close on that contract before July 1, 2010, the tax credit can be claimed.
  • A new tax credit for “long-time residents of same principal residence” has been created. This has been reported in many places as a tax credit for “move up buyers”. Here is the actual verbiage of the new tax credit for existing home owners:

EXCEPTION FOR LONG-TIME RESIDENTS OF SAME PRINCIPAL RESIDENCE.–In the case of an individual (and, if married, such individual’s spouse) who has owned and used the same residence as such individual’s principal residence for any 5-consecutive-year period during the 8-year period ending on the date of the purchase of a subsequent principal residence, such individual shall be treated as a first-time homebuyer for purposes of this section with respect to the purchase of such subsequent residence.

  • The tax credit for existing “long time resident” home owners purchasing a new home is 10% of the purchase price, up to $6,500.
  • The old $8K credit had income limits of $75,000 for singles and $150,000 for married couples filing jointly. The income limits have been increased to $125,000 / $225,000.
  • No credit shall be allowed for the purchase of any residence if the purchase price exceeds $800,000.
  • All of this applies to primary residences only. No second home or investment properties are eligible for the tax credit.
  • For members of the Armed Forces deployed on duty outside the United States, the tax credits are extended to May 1, 2011 (must close before July 1. 2011) Must be deployed outside the U.S. for at least 90 days between Dec 31, 2008 – May 1, 2010.
  • “Fraud prevention” measures have been implemented. The tax credit can not be claimed by anyone under 18 years of age (some knucklehead tried to put it on the tax return of a four year old). Also, a “properly executed copy of the settlement statement used to complete such purchase” must be attached to the tax return claiming the credit (I take this to mean a copy of the signed HUD-1 Settlement Statement. But check that with your tax advisor!)

Of interest: According to economists at Goldman Sachs, around 70% of all current homeowners would be eligible for the expanded home buyer tax credit.