President Obama signed into law an extension and expansion of the home buyer tax credit on Friday, November 6th.

A tax credit of $8,000 currently exists for first-time homebuyers who will close on a home by November 30, 2009. This credit was set to expire on December 1, but it will now remain in effect through the end of June 2010.  To qualify, buyers must sign a contract before April 30, 2010 and close on the property by June 30, 2010.

This law offers a new $6,500 tax credit for current homeowners looking to buy up. This new credit is intended to reach those who have been waiting for the right time to buy. Those who have used their home as their primary residence for five consecutive years our of the last eight can claim the credit.  They must also close by the end of June, 2010. 

Congress substantially increased the income limits on the tax breaks as well. Individuals earning less than $125,000 will now be eligible (currently $75,000), and married couples with income less than $225,000 who file jointly are eligible (up from $150,000). One item to note, the tax credit can only be used to purchase homes that cost less than $800,000.

The deadline for prchase agreements must be signed by April 30, 2010, and closings must be final by June 30. Military deadline: The deadline is extended by a year for members of the military who have served outside the U.S. for at least 90 days from Jan. 1, 2009, to May 1, 2010.

Taxpayers can claim the credit on their federal income tax returns. If the credit exceeds their tax bill, the government will issue a payment. Taxpayers who want immediate refunds can amend their tax returns for 2008 to claim the credit