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The original $8,000 first time home buyer credit was instituted as a means of fighting the collapse of the real estate market and though it had some limited impact it was not a very strong one. The reason for this was that property values continued falling throughout much of 2009, making potential home buyers wary of buying until the market bottomed out. In November 2009, the first time home buyer credit was extended through 2010 and since many of the key residential housing markets began bottoming out in later 2009, it seems that the extension will be more effective than the original credit.

Along with the extension passed in November 2009, additional reporting requirements were also added to the credit, resulting in the introduction of a new irs tax form, Form 5405. Unlike the previous credit, which was just an additional option on the home buyers regular tax return, the extension version requires all people claiming the credit to file a paper return – as opposed to an electronic one – and to attach Form 5405 to it. Further, the return and Form 5405 also has to be accompanied with a copy of the settlement statement, sales contract (for mobile homes), or certificate of occupancy (for newly built homes).

According to the Worker, Homeownership and Business Assistance Act of 2009, the new first time home buyer must buy a qualifying home by April 30, 2010 and must close on the property by June 30, 2010. The $8,000 credit can be claimed on either the 2009 or the 2010 tax return. The extended version of the law also extended the credit to people who had lived in their own private residence for up to five years previously and decided to purchase a new home, meaning that it is no longer limited merely to first time home buyers and it also increased the income limits on people buying a new home. The extended law made the basic idea of providing a strong incentive to buy a home much stronger, even if it did result in additional paperwork, like the Form 5405.