First- time homebuyers purchasing any home new or resale are eligible.

The law defines the first- time homebuyer as a buyer who has not owned a principle residence during the three year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the homebuyer and his or her spouse. As an example, if you have not owned a home in the last 3 years but your spouse has owned one, neither you nor your spouse will qualify.

Yes, homebuyers who file their taxes as single or head –of- household, can Claim the credit if their adjusted gross income (MAGI) is less than $75,000. For married taxpayers filing joint tax returns, the MAGI limit is $150,000. The limit is based on the buyer’s modified adjusted gross income for the year the house was purchased except for certain purchases in 2009.

Yes, basically the tax credit is equal to 10% of the qualified purchase price of the home, but the amount of the credit is capped at $7,500. For most first-time homebuyers this means the credit will equal $7,500. For homebuyers purchasing a home for under $75,000 the tax credit will equal 10% of the purchase price.

Maybe, anyone who is not a non-resident alien (as defined by the IRS) who has not owned a principal residence in the previous 3 years and who meets the income limits, may claim the tax credit for a qualified home purchase. The IRS provides a definition of a “non-resident alien” in IRS publication 519 (www.irs.gov/pub/irs-pdf/p519.pdf).

This means that the homebuyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this means that the government will send the taxpayer a check for a portion or even the entire amount of the tax credit.

For example, if a qualified homebuyer expected a federal income tax liability of $6,000 and had tax withholding of $5,000 for the year, then without the tax credit the taxpayer would owe the IRS $1000 on April 15. Suppose now that the taxpayer qualified for the $7,500 homebuyer tax credit. As a result the taxpayer would receive a check for $6,500. ($7,500 minus the $1,000 owed).

Yes, the tax credit must be repaid. Homebuyers will be required to repay the credit to the government over 15 years or when they sell the house if there is sufficient capital gain from the sale. For example a homebuyer claiming a $7,500 credit would repay the credit at $500 per year. The homeowner does not have to begin making repayments until 2 years after the credit is claimed. So if the tax credit is claimed on the 2008 return, a $500 payment is not due until the 2010 tax return is filed. If the homeowner sells the home, then the remaining credit amount will be due from the profit of the home sale. If there is insufficient profit, then the remaining credit payback will be forgiven.

Yes, because the tax credit must be repaid it operates like a zero interest loan. Assuming an interest rate of 7% this means the homeowner saves up to $4,200 in interest payments over the 15 year repayment period. Compared to $7,500 financed through a 30 year mortgage with a 7% interest rate, the homebuyer tax credit saves homebuyers more than $8,100 in interest payments. The program is called a tax credit because it operates through the tax code and is administered by the IRS. Also like a tax credit, it provides a reduction in tax liability in the year it is claimed.

A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $7,500 in income taxes and who receives a $7,500 tax credit would owe nothing to the IRS.

Yes the law allows the taxpayer to choose (“elect”) to treat qualified home purchases in 2009 as if they occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing to 2008 returns instead of for the 2009 returns). A benefit of this election is that the homebuyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

Yes, If the applicable income phase out would reduce your homebuyer tax credit in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.