Video: Learn About The First-Time Homebuyer's Credit

Hi, I'm Michael Alban from TurboTax with a news flash for homebuyers and homeowners.

In November 2009, the federal government extended and expanded the popular First-Time Homebuyer's Credit program. It lets you trim your tax bill by up to $8,000, a boon to homeowners facing mortgage payments for the first time.

Sign a binding contract to buy a principal residence on or before April 30th, 2010, then close by June 30th and you can claim the credit on your 2009 or your 2010 tax return.

Besides extending the deadline, the IRS has lifted income ceilings. Married couples making up to $225,000 combined and individuals making up to $125,000 are now eligible. Benefits start to fade, though, toward the top of that range, and the credit cannot be claimed for homes costing more than $800,000.

If you have not owned a home for three years, the IRS will consider you a first-time homebuyer. If you're married, you and your spouse must qualify.

Now, some current homeowners may also benefit. If you have lived in your home for at least five of the past eight years, you can receive a tax credit of up to $6,500 for buying a new home. Use it to pay your monthly mortgage, start a retirement account, or embark on home improvements. There are no credits for second homes or vacation homes.

Taxpayers who move often should note another wrinkle. After claiming the credit, you must occupy the house as a primary residence for three years. If you sell it or convert it to business or rental use sooner, you may owe the IRS the full amount you received.

For more information about the first-time homebuyer's credit, deductions for homeowners and other tax tips, visit TurboTax.com.