Come on along for the ride…

Congress passed and the President signed the law extending the first-time tax credit until next June 30th. They also threw in a $6,500 carrot for people who were not eligible for the original credit – current homeowners. The new $6,500 federal tax credit for so-called "move up" buyers took effect immediately upon enactment. That means that potentially hundreds of thousands of Americans who fit the key ownership and income criteria for the new credit are eligible for it … right now.

What are those tests?

Number one: You have to have owned and used your current home as your principal residence for five consecutive years out the past eight;

Number two: Your adjusted household annual income cannot exceed $125,000 if you file taxes as a single, or $225,000 if you are married filing jointly.

To qualify, you've got to sign a contract to purchase a replacement residence before next April 30, and go to closing on it by June 30, 2010.

In addition to the traditional move up buyers, this is great news for the thousands of baby boomers who were hoping to downsize in retirement. This tax credit may help take some of the sting out of the loss that many will have to take on their current homes.

This is also good news for the real estate industry. While first-time buyers have fueled a huge surge in the market, most of the homes that they are buying are starter homes or foreclosed and short sale properties at the lower end of the market. This new incentive may help fence sitters in the middle of the market take action to buy that next house. Many will have to sell their current home; so, that will add to the inventory at the lower end, giving the first-time buyers more choices.

This new incentive is likely to have the most impact in the middle of the country, where homes are more reasonably priced and incomes a bit lower, than on the coasts. That’s good news, since Middle America can use a break about now. The fact that it may help the battered baby boomer generation is good news too, although they still have to get out from under their McMansions in order to use the tax break.

For a FAQ from the National Association of Realtors on the new tax law, click here.