You may have heard about the $8000 first time home buyer tax credit, but are you also aware that the tax credit has now been extended to repeat home buyers? That’s right, repeat home buyers are now eligible for up to $6500. On top of that, both tax credits have been extended all the way to April 2010. Here is everything you need to know about the new rules and regulations.

Who is Eligible?
The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. Even if you currently own rental property or a vacation home, but it is not your principal residence, you could still be a first-time homebuyer.

The $6500 tax credit is also available for repeat home buyers. Homeowners who have resided in one specific home for at least five years of the past eight years, are now eligible for 10% of the cost of their new home purchase with a $6500 limit.

Payback Provisions
The tax credit is a true credit. It does not have to be repaid. Even if you owe no tax or the credit is more than the tax owed.

The only repayment requirement is if the home owner sold the home within three years after the purchase.

Income Limits
Income limits have been raised with the new extension.

Home buyers who file as single or head-of-household taxpayers can claim the full $8,000 credit if their Modified Adjusted Gross Income (MAGI) is $125,000 or less.

For married couples filing a joint return, the income limit doubles to $225,000.

Single or head-of-household taxpayers who earn between $125,000 and $145,000 are eligible to receive a partial first-time home buyer tax credit.

Married couples who earn between $225,000 and $245,000 are eligible to receive a partial first-time home buyer tax credit.

The credit is not available for single taxpayers whose MAGI is greater than $145,000 and married couples with a MAGI that exceeds $245,000.

Effective Dates for the Tax Credit
April 30th 2010 is the deadline to have a written binding contract of your new home purchase. But as long as the contract in effect by April 30th, the purchaser will have until July 1st 2010 to close.

The Tax Credit is Refundable
A refundable credit means that if you pay less than $8,000 in federal income taxes, then the government will write you a check for the difference.

For example, if you owe $5,000 in federal income taxes, you would pay nothing to the IRS and receive a $3,000 payment from the government.

If you are due to receive a $1,000 tax refund from the government, your refund would grow to $9,000 ($1,000 plus $8,000 from the home buyer tax credit).

Buyers can take the tax credit on their 2009 or 2010 income tax return. A new version of Form 5405, First-Time Homebuyer Credit, will soon be available. A taxpayer who purchases a home after Nov. 6 must use this new version of the form to claim the credit. If you are choosing to claim the credit on your 2009 returns, no matter when the house was purchased, you must also use the new version of Form 5405.

Types of Homes that Qualify for the Tax Credit
All homes, whether single-family, townhomes, co-ops, or condominium apartments will qualify, provided that the home will be used as a principal residence. This also includes newly-constructed homes.

If you have any questions about the tax credits, and want to see if you personally qualify, call Grace Borzini and her team at Oak Shores Realty. They have sold over 200 properties in 2009 alone. Oak Shores agents are able to use their knowledge and experience to help you make the most of your real estate investment. Call 805-472-9030 for more information.