First-Time Homebuyer Tax Credit 

How does a tax credit work?

• Reduces income tax liability
• Credits are claimed on an individual's income tax return
• Maximum credit amount is $7500

Who can use the new tax credit?

• First-time homebuyers or individual who has not had an ownership interest in a principal residence in the previous three years.

What if my taxes due on my return are less than $7500

• The difference would be treated as an overpayment and the purchaser(s) would receive a tax refund.

Is there an income restriction?

• Based on tax filing status
• Single or head of household < $75,000
• Joint filing < $150,000

Do individuals with incomes higher than the $75,000 or $150,000 limits lose all the benefit of the credit?

• No, individuals making up to $95,000 and joint filers making up to $190,000 are eligible for a partial tax credit

Is the amount of the credit tied to the price of the home?

• Yes, credit is 10% of the cost of the home, maximum credit of $7,500
• Amount of credit is same for all taxpayers, married or single

Are there property location restrictions?

• Property must be located within the United States

How do I apply for the credit?

• Claim the credit on the appropriate IRS form 1040, or any special forms the IRS requires.
• No pre-purchase authorization, application or similar approval process

Can I use the credit amount as part of my downpayment?

• Cannot claim the credit any earlier than the 2008 tax return that will be filed in 2009.

What is the repayment feature of the credit?

• There is no precedent for repayment of a tax credit created for individuals at this time.

Terms for repayment?

• Repaid in increments of 6.67% of the amount over 15 years

When do I make a repayment?

• Credits taken in 2008 will not be repaid until 2010

Can the IRS put alien on my property for the amount of the credit repayment?

• The statue does not grant the IRS that authority

What if I sell my home before the 15-year repayment period?

• Any amount of the unpaid credit will be reduced from any proceeds
• If there is a loss or the gain from the sale is less than the amount of the repayment then the liability is forgiven.

Any other exceptions to repayment?

• If the person dies before credit is repaid the amount is disregarded
• There are special adjustments to people who sell as part of a divorce and/or homes that are part of an involuntarily conversion.

If I received a refund of a portion of the tax credit because my total tax liability was less than the amount of my tax credit, do I have to repay the amount of the refund?

Yes