There’s been a big buzz about the First Time Home Buyer tax incentive…and many questions about how it works. Here are some answers to commonly asked questions.

WHO IS ELIGIBLE

The $8,000 (or 10% of purchase price, whichever is less) tax credit is available for first time home buyers only. The credit does not have to be repaid, provided you stay in the home for 3 years.
The law defines a first-time home buyer as a buyer who has not owned a home during the past three years.
All U.S. Citizens who file taxes are eligible to participate in the program.
TYPES OF HOMES THAT QUALIFY

All homes, whether single-family, townhouses or condominiums will qualify
However, there are several conditions:
- The home must be used as a principal residence, and the buyer has not owned a home in the prior three years.
The Tax Credit includes newly-constructed homes
INCOME LIMITS

Home buyers who file as single or head-of-household taxpayers can claim the full $8,000 (or 10% of purchase price, whichever is less) credit if their modified adjusted gross income (MAGI) is less than $75,000.
For married couples filing a joint return, the income limit doubles to $150,000.
Single or head-of-household taxpayers who earn between $75,000 and $95,000 are eligible to receive a partial first-time home buyer tax credit.
Married couples filing jointly who earn between $150,000 and $170,000 are eligible to receive a partial first-time home buyer tax credit.
The credit is not available for single taxpayers whose MAGI is greater than $95,000 and married couples filing jointly with a MAGI that exceeds $170,000.
EFFECTIVE DATES FOR THE TAX CREDIT

First-time home buyers who would receive up to an $8,000 tax credit for the purchase of any home on or after January 1st, 2009 and before December 1st 2009. To qualify, you must actually close on the sale of the home during this period.
TAX CREDIT IS REFUNDABLE

A refundable tax credit means that if you pay less than the max credit (up to $8,000) in federal income taxes, then the government will write you a check for the difference.
-For example, if you owe $5,000 in federal income taxes, you would pay nothing to the IRS and receive a $3,000 payment from the government. (if your credit was for the full $8,000)
- If you are due to receive a $1,000 tax refund from the government, your refund would grow to $9,000 ($1,000 plus the $8,000) if your credit was for the full $8,000.
PAYBACK PROVISIONS

If the home is sold within three years of purchase, the entire amount of the credit is recaptured on sale. Applies only to homes purchased in 2009.

Further information regarding the tax credit may be found at www.federalhousingtaxcredit.com or www.irs.gov

This information is provided for general awareness only and is not intended for the purpose of providing legal, accounting, tax advice or consulting of any kind. Please consult with your tax professional for complete details.