Tax break central: Making the most of the homebuyer tax credit

As you prepare to file your 2010 income tax return, there are some new rules that might help you minimize the amount you owe. If you qualify, be sure to take advantage of this opportunity.

Some people who bought houses in early 2010 can claim tax credits. Buyers who did not own a principal residence for the three years before the purchase of the house can get a credit of up to $8,000. And those who owned and lived in a home for at least five consecutive years during the eight years before the purchase of the new house can claim a tax credit of up to $6,500.

To get either tax credit in full for 2010, your income last year should not have exceeded $125,000, or $225,000 on a joint return. With higher income, you might get a smaller tax break; the credit phases out for singles earning $145,000 and joint filers earning $245,000. It applies only to a principal residence, and houses that cost more than $800,000 don't qualify.

You must have entered into a binding contract by April 30, 2010, to claim either credit. Originally, you had until June 30 to close the sale, but Congress extended that deadline to Sept. 30. If you made a qualifying purchase in 2010 and did not already claim the relevant credit on your 2009 return, you can do so on your 2010 return.

This tip is from an article that appeared in the February 2011 Consumer Reports Money Adviser.