Facts about the First-Time Homebuyer Tax Credit

Last year, the Federal Government enacted the Housing and Economic Recovery Act of 2008 to help stimulate the housing market by giving a tax credit to first-time home buyers. The basic idea of the act is to bring a new group of buyers into the housing market to add additional sales; first-time buyers don’t have an existing home to sale, but sellers will more than likely need to find a new home once their property has sold.

Below are some things you need to know about this credit if you are thinking about buying in 2009:

Basics about the Credit:

• First-time home buyers, as well as buyers who have not owned a home in the past 3 years are eligible
• Provides a tax credit of up to $7500 for qualifying purchases on your 2008 or 2009 tax return
• Credit operates like an interest-free loan, repayable over a 15-year period.

Eligibility:

• Purchase must be made between April 8, 2008 and July 1, 2009
• Credit is phased out based on your modified adjusted gross income (MAGI) - for a married couple filing jointly, the phase-out range is $150,000 to $170,000. For other taxpayers, the phase-out range is $75,000 to $95,000
• Home must be purchased to be used as a primary residence.

Repayment:

• Credit is repayable over a 15-year period, with 15 equal installments
• Repayment begins with the second tax year after the year the credit is claimed
• The repayment amount is included as an additional tax on your income tax return.

For full details about the Housing and Economic Recovery Act of 2008, and to see if you are eligible, click here.