First-Time Home Buyer Tax Credit

• The tax credit is for first-time home buyers only.
• The tax credit does not have to be repaid.
• The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $8,000 credit.
• The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.
• Single taxpayers with income up to $75,000 and married couples with income up to $150,000 qualify for the full tax credit.

$8,000, new buyers: This credit is equivalent to 10 percent of the purchase price of the home--although it's capped at $8,000--and applies only to first-time home buyers and principal residences.

First time buyers defined: For the purpose of this legislation, a "first-time home buyer" is someone who has not owned a principal residence for three years before buying a house. The date of purchase is considered the day that the title is transferred. That means if you've owned a vacation home--but not a principal residence--within the past three years, you would still qualify for the credit.

Definition of Principal Residence: Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats.

2009 buyers only: Only those who purchase a home on or after January 1 and before December 1, 2009 are eligible for the credit. Anyone who bought a home last year will not be eligible for this credit.

Income limits: The tax credit is subject to income limitations. Single buyers need a modified adjusted gross income of $75,000 or less to qualify for the full credit or $150,000 for married couples. Anyone earning more than these thresholds may be eligible for reduced credits.

Refundable: Because the tax credit is "refundable," qualified buyers can take advantage of it even if they did not have much tax liability.

Recapture: Buyers have to own the home for at least three years in order to capitalize on the credit. If they sell the home before then, they will have to return the credit to the government. Exceptions will be made in certain cases, such as death or divorce.

Amend 2008 return rather than wait until 2009: The law allows taxpayers to choose to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit.

Co-signor is ok: Unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter.

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Frequently Asked Questions about the Home Buyer Tax Credit