Home Buyer's Tax Credits

First-time-home buyer tax credit: 

First time home buyers are eligible for a tax credit of 10% of the purchase price up to a maximum of $8,000.  To qualify for the tax credit, the purchaser must have the property under contract by April 30, 2010 and must close on it by June 30, 2010.   The IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase so you may qualify even if you have previously owned a home but have been renting for a few years. The home must be used as their primary residence for a 3 year period subsequent to closing as well, or else the credit will have to be repaid.  I'm sure you will be devastated to hear that the the tax credit only applies to homes with a  purchase price of under $800,000.

Existing Home owners tax credit:

 Existing home owners can also claim a tax credit for purchasing a new home. It doesn't matter if the newly purchased home is more or less expensive than the previous home the buyer had previously claimed at their principle residence.  In order to qualify, first of all, the previous home must have been occupied as the buyer's principal residence for at least five consecutive years out of the past eight years. There are important issues of timing as well. Again, just as with the first time home buyer credit, you must purchase (that is close on) the replacement home sometime before 4/30/2010. With one exception: the new home will also qualify if you had entered into a binding contract no later than April 30, 2010 and you closed no later than June 30, 2010.

 Again, the tax credit is for 10% of the purchase price up to a maximum credit of $6,500. Certain income limits apply as well and the cost of the new home again may not exceed $800,000 - which means that 99.9% of Vermont homes would qualify.  And again, the new home must be used as a principal residence for a three year period subsequent to closing, or else the credit must be repaid.

The time the previous home sold doesn't matter. In fact, it doesn't even have to be sold. You might, for example, keep it as a rental.