[Quoted from Here]
First-time home buyers still get a credit of as much as 10% of the purchase price, up to a maximum $8,000. "First-time" means people, including both partners of a married couple, who haven't owned a principal residence for three years before the purchase. So if you have never owned a home, but your wife has recently, then you don't qualify.
All taxpayers who claim a credit must use the home as a principal residence for the next three consecutive years.
Under the new law, as under the old, 2009 home buyers may claim the credit on either their 2008 or 2009 returns, and 2010 buyers may claim the credit on either their 2009 or 2010 returns.Taxpayers do not qualify for a credit if they buy from a lineal ancestor or descendent, including parents or grandparents and children or grandchildren. Also, it can't be from their spouse or the spouse's lineal relatives.
To take advantage of the tax credits, a buyer must have a contract in place before May 1, 2010, and the deal must close before July 1, 2010. No further extension is expected.
The price of the house is now capped. For purchases made after Nov. 6, no credit is available for any home costing more than $800,000.
There is now a tax credit for repeat buyers as well as for first-time buyers. Taxpayers who have lived in one residence for five consecutive years of the past eight can now qualify for a tax credit of as much as 10% of the purchase price, up to a maximum $6,500, of a new principal residence. The new home does not have to cost more than the old one. [so you can't buy a second home or a rental property to qualify]
Income limits for people who qualify for a tax credit are far more generous than under the previous law. For single filers, the credits now phase out between $125,000 and $145,000 of modified adjusted gross income; for married couples, the range is $225,000 to $245,000. For most people, modified adjusted gross income will be the same as adjusted gross income.
The new law contains anti-abuse measures designed to stem fraud, which became a problem with the previous home-buyer tax credit. Most buyers must be 18 or older, and no taxpayer may take a credit if he or she is claimed as a dependent on someone else's return. Taxpayers taking the credit will also have to furnish proof of purchase. According to Robert Dietz of the National Association of Home Builders, this will usually be a HUD-1 form.
Q: If I buy a new home and live in it, do I also have to sell my old one in order to take advantage of the credit?
This is unclear. The law appears to allow repeat buyers to retain their old home, for which no tax credit was given, while claiming a credit for the new one. What is clear is that if you buy a new home using the credit, you must use it as your principal residence.
Q: Is it possible to qualify for a credit if I am building a home on a lot I already own?
Yes, according to the National Association of Home Builders. The purchase date is usually considered to be the date of first occupancy, so you would need to move in before July 1, 2010.
Note: This credit has been abused greatly, and most professionals are expecting a very high audit rate of those who claim this credit. That doesn't mean don't claim it, after all they are giving away money here, but make sure you qualify (and double check the rest of your return while you're at it).
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