NOTE:  This document is for informational purposes and should not be construed as tax or legal advice.  For specific advice on their own tax situation consumers should always consult a qualified tax professional.   

 

1. The amount of the credit is $8,000 and it is not a loan. 
Unlike the old 2008 program, this is a true credit via “Tax Refund” of $8,000 (or 10% of home purchase price, if less).  You will get this money when you file your tax return FY 2009.  Recapture or repayment would only be required if you sold your home within 36 months of purchase.  
     
2.  Who are eligible first-time buyers?  Probably more people than you think.
 Any person who has not owned a principal residence in the past three years qualifies as a first-time home buyer.  Also, someone who currently owns rental property or a vacation home that is not their principal residence could still be a first-time homebuyer.   

 

3. The Modified Adjusted gross income limit is $75k for singles, $150k for couples. 
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

 

To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.  Singles cannot make more than $75,000 in MAGI and married couples cannot make not more $150,000 in order to get the full credit.   Partial credit is available for those with MAGI between $75k to $95k ($150k-$170k for joint filers).

 

4. What housing qualifies as a Principal Residence purchase?
Single family homes, condos, townhouses, and co-ops qualify so long as they are used as the taxpayer’s principal residence.  The home must be purchased between January 1, 2009 and December 1, 2009.  Homes purchased last year do not qualify for this program.  Also, sales between immediate family members are ineligible.    

 

5. Is there anything else homebuyers should know? 
Yes!  This Q&A is intended to provide a quick overview.  There are numerous other provisions in the new credit and homebuyers should understand them clearly before they make any decision regarding their eligibility.

 

For more complete info on this program go to Government Affairs and consult a tax professional.