Dear Savvy Living,

I've heard that Congress recently passed a new homebuyer's tax credit available to older homeowners. What can you tell me about this? My wife and I have been thinking about downsizing to a smaller one-story house or condo and would like to find out if this could benefit us.


Dear Don,

For retirees looking to relocate or downsize to a smaller home, the new homebuyer's tax credit offers a great financial incentive. But, if you want to take advantage of the credit, you'd better get moving. Here's what you should know.

New Tax Credit

In an effort to help boost the U.S. housing market, in November 2009 Congress established a new tax credit of up to $6,500 to help long-time homeowners who want to relocate. To be eligible, you must have owned and lived in the same home for five consecutive years. Unfortunately, Uncle Sam doesn't give you much time to take advantage of this offer. To get this credit you'll need to sign a contract on a new place by April 30 and close by June 30.

The types of homes that qualify for the tax credit include single-family homes, townhouses, condominiums and manufactured/mobile homes. Your new place must also be your principal residence (it can't be a vacation home) and cost less than $800,000. There's also an income qualification. To get the full credit, your modified adjusted gross income will need to be under $125,000 ($225,000 for joint filers). If your income is between $125,000 and $145,000 ($225,000 to $245,000 for joint filers) you're eligible for a reduced credit.

You also need to know that you don't have to sell your old place to get this tax credit. You could rent it or keep it as a vacation home. And, you can claim the credit on either your 2009 or 2010 tax return which will reduce the tax you owe or boost your refund by your tax credit amount. To receive your credit, you'll need to file IRS Form 5405 (see www.irs.gov/pub/irs-pdf/f5405.pdf) with your tax return. Also note that if you move out of your new home within three years you'll have to repay the credit. For more detailed information on the homebuyer's tax credit visit www.federalhousingtaxcredit.com, an educational website developed by the National Association of Home Builders.

Affordable Housing

For lower income seniors, age 62 and older, who are looking for an affordable new place, there's good news to report here, too. Congress recently approved a $60 million, or an 8%, increase for the Section 202 program this year. Sec. 202 is the government's affordable housing program dedicated to seniors. Section 202 provides grants and rental help through nonprofit sponsors of low income senior housing. Residents typically pay no more than 30% of their income on rent.

To find this type of affordable senior housing in your area, call your local housing authority (see www.hud.gov/pihforseniors or call 800-955-2232 for contact information) or your area agency on aging (call 800-677-1116 to get your local number) or you can do a search online at www.hud.gov/apps/section8.

Savvy Living is written by Jim Miller, a regular contributor to the NBC Today Show and author of "The Savvy Senior" book. Any links in this article are offered as a service and there is no endorsement of any product. These articles are offered as a helpful and informative service to our friends and may not always reflect this organization's official position on some topics. Jim invites you to send your senior questions to: Savvy Senior, P.O. Box 5443, Norman, OK 73070.