A couple with joint income less than $225,000 annually.

The couple has owned a personal residence consecutively for 5 of the last 8 years and sells this home to purchase a new home for $200,000 which takes place prior to May 1, 2010. The couple qualifies for the $6,500 tax credit. Please note that you are NOT required to sell your current personal residence in order to qualify for this $6,500 tax credit.

Assume their 2009 federal tax liability is $12,500 without the tax credit, the $6,500 tax credit would lower their federal tax liability to only $6,000.

If the couple’s 2009 federal withholdings was exactly $12,500, they would have received no refund without the tax credit because their federal income taxes equal their federal withholdings exactly.

With the Existing Homeowner Tax Credit, the couple will get a tax refund of $6,500.