: They had to prove they owned and used the same home as their principal residence for any consecutive 5-year period during the 8 years leading up to their new purchase.

Imagine a couple in early 2010 who had lived in their starter home for six years. They were ready for more space but hesitant to buy while the market was so volatile. The new law offered them a —a "step-up" incentive that previously only applied to first-time buyers. To qualify, they had to navigate strict federal rules:

: Their joint modified adjusted gross income (MAGI) had to be below $225,000 to receive the full credit. The Benefit and the Paperwork

: The IRS required every claimant to file a paper return and attach Form 5405 along with a settlement statement to prevent fraud.

Here is a look at how this credit worked through a typical scenario of the time. The "Step-Up" Story: Meeting the Deadlines

: They had to sign a binding contract by April 30, 2010 , and originally close by June 30, though this was later extended to September 30, 2010 .

In 2010, the U.S. housing market was still reeling from the 2008 recession, with home prices plummeting at nearly 20% annually. To combat this, the introduced a unique "long-time homebuyer credit" to incentivize existing homeowners to move.