First Time Homebuyer Tax Credit Extension

Obama Signs Credit Extension for first-time homebuyers -- by Lewis Green
Recently, President Barack Obama signed legislation that will extend a tax credit for first time homebuyers into next year.

Through the tax credit, first time homebuyers who have a contract in place on a new home by April 30, 2010, are eligible for an $8,000 tax credit. Those buyers must close on their new home purchase by June 30 of that year. Also, members of the military who find themselves serving overseas are eligible for the credit until May, 2011.

Many experts in the housing market tied an increase to housing sales to the tax credit, which was slated to expire soon. In fact, home sales dropped 3.6 percent in September, with some saying that the coming expiration of the housing credit played a role in that decline.

"The rebound in the housing market was one of the big factors that contributed to the growth of the economy in the last quarter and brought hundreds of thousands of families into the housing market," Obama said. "We want to give even more families the chance to own their own home."

A smaller version of the credit has also been created for people who plan on buying a new home. A homeowner who has lived in their house for at least five years is entitled to a $6,500 credit if they buy a new primary residence.

There are a number of limitations on the tax credit. For example, the property people plan on purchases cannot be more than $800,000. How much people earn also plays a factor, though the bill does expand income thresholds for the credit. For individuals, the limit was expanded from $70,000 to $125,000, and for couples it was moved from $150,000 to $225,000.