Tax Credit for First-Time Homebuyers

By Shannon Petrie, FrontDoor.com | Published: 2/26/2009

Last year, the Housing Assistance Tax Act of 2008, part of the Housing and Economic Recovery Act of 2008, offered first-time buyers a tax credit up to $7,500. This credit had to be paid back over a 15-year period, essentially making it an interest-free loan. The new tax credit, on the other hand, does not have to be repaid.

How It Works

"Unlike a tax deduction, a tax credit is a dollar-for-dollar reduction in the amount of taxes owed to the IRS," said Martin Hernandez, vice president of sales for Beazer Homes, in a video webinar posted on Aug. 19. "This means the tax credit provides a reduction in the tax liability, or taxes owed, in the year it is claimed."

For instance, a taxpayer who owes $8,000 to the IRS but also qualifies for the tax credit would owe nothing to the IRS. A taxpayer who owes less than $8,000, say $5,000, would receive a check from the IRS for up to $3,000.

Who's Eligible

• The tax credit is available for first-time homebuyers, defined as a buyer who has not owned a principal residence during the three-year period prior to the purchase.
• Buyers must purchase a home on or after Jan. 1, 2009, and before Dec. 1, 2009, in order to qualify.
• Individuals with a modified adjusted gross income (MAGI) of $75,000 or less and married couples with a MAGI of $150,000 or less are both eligible.
• Partial credit is also available for individuals with a MAGI of $95,000 or less and married couples with a MAGI of $170,000 or less.
• All types of homes are eligible for the tax credit as long as the home is used as a principal residence.

Additional Information

• Buyers must live in the home for at least three years or will be obligated to repay the credit.
• The tax credit is refundable, meaning qualified buyers can claim the credit even if they have little to no federal income tax liability.
• To learn more about the tax credit, visit FederalHousingTaxCredit.com.

More...

• Obama Offers Housing Help in Economic Stimulus Package
• What You Need to Know About Obama's Stimulus Package
• First-Time Homebuyer's Guide
• Home Finance Guide

Comments