Are you still teetering on the fence whether or not to purchase a home in 2010? Are home prices going to dip while interest rates rise? Is inventory going to increase, especially the REO/Foreclosure segment of the market that we have been hearing about for more than a year now? We do not know what’s in store for the housing market in 2010, however, The Worker, Homeownership and Business Assistance Act of 2009, signed into law on Nov. 6, 2009, extends the first-time homebuyer tax credit and expands the credit to move-up/repeat home buyers and here’s what you need to know.

The new law states that “an eligible taxpayer must purchase, or enter into a binding contract to purchase, a principal residence and close escrow on or before April 30, 2010.” However, the tax credit will qualify if a binding purchase contract is signed by April 30, 2010 and escrow closes by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax return. If the home was purchased between January 1, 2009 – November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing joint tax returns. If the home was purchased between November 7, 2009 – April 30, 2010, the income limits are $125,000 for single taxpayers and $225,000 for married couples filing joint tax returns (an increase of $50,000 for single taxpayers and $75,000 for married couples).

The tax credit for first-time home buyers (the IRS defines a first-time home buyer as someone who has not owned a principal residence the past three years prior to the purchase) is equal to 10 percent of the purchase price (up to a maximum of $8,000 as the tax credit applies only to homes priced at $800,000 or less). The tax credit doesn’t have to be repaid unless the home is sold or no longer used as the buyer’s principle residence within three years after the purchase.

The credit is also valid for current homeowners buying a replacement principal residence. Eligibility to claim the tax credit states that the buyers must have owned and lived in their previous home for five consecutive years out of the previous eight years. The tax credit is equal to 10 percent of the purchase price (up to a maximum of $6,500 and the tax credit applies only to homes priced at $800,000 or less). The credit is available if the home was purchased between November 7, 2009 – April 30, 2010. However, the tax credit will qualify if a binding purchase contract is signed by April 30, 2010 and escrow closes by June 30, 2010. The income limits are $125,000 for single taxpayers and $225,000 for married couples filing joint tax returns. The tax credit doesn’t have to be repaid unless the home is sold or no longer used as the buyer’s principle residence within three years after the purchase.

With the tax credit deadline looming on April 30, 2010, historically low interest rates, low home prices, and low inventory, you may want to consult with a realtor, financial planner and tax consultant to determine whether or not the time for homeownership is right for you. Opportunity is knocking on your future front door, take advantage of it before it’s too late!

Posted By: Doug Hecker