Initially scheduled to expire on December 1, 2009, the first time home buyer tax credit will now be extended to May 1, 2010. An addition to the extension, the new law also features some significant changes to this new tax credit that should allow many more home buyers to qualify for it.  Below are some new elements of the extension:

  • Credit available for purchases before May 1, 2010. Prospective purchasers with binding contracts in place as of April 30, 2010 will be allowed an additional 60 days to complete the transaction.
  • Credit remains at $8000 for first-time purchasers. 
  • New $6500 tax credit for repeat buyers who purchase between December 1, 2009 and May 1, 2010. The buyers must have lived in their homes consecutively for 5 of the previous 8 years.
  • Income limits are expanded to $125,000 on a single return and $225,000 on a joint return. 

Homebuyers who purchased a home in 2008 or 2009 may be able to take advantage of the first-time homebuyer credit. The credit applies only to homes used as a taxpayer's principal residence. This reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar and is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

For more information on how to file for this credit or for frequently answered questions, visit the IRS website.