Frequently Asked Questions About the Federal Home Buyer Tax Credit

Who is Eligible?
-First-time homebuyers, who have not owned a principal residence during the three-year period prior to the purchase, may be eligible for up to an $8,000 tax credit.
-Existing homeowners who have been residing in their principal residence for five consecutive years out of the last eight and are purchasing a home to be their principal residence (“repeat buyer”), may be eligible for up to a $6,500 tax credit.
-All U.S. citizens who file taxes are eligible to participate in the program. 

****Read the important Special Rules below for members of Active Military, Foreign Service and Intelligence Community

Are There Income Limits?
Homebuyers who file as single or head-of-household taxpayers can claim the full credit ($8,000 for first-time buyers and $6,500 for repeat buyers) if their modified adjusted gross income (MAGI) is less than $125,000.
-For married couples filing a joint return, the combined income limit is $225,000.
-Single or head-of-household taxpayers who earn between $125,000 and $145,000, and married couples who earn between $225,000 and $245,000 are eligible to receive a partial credit.
-The credit is not available for single taxpayers whose MAGI is greater than $145,000 and married couples with a MAGI that exceeds $245,000. 

Must I Purchase a Home By a Specific Date?
-The eligibility period for the tax credit is for homes under contract through April 30, 2010, and where the transaction closes no later than June 30, 2010.  "Repeat Buyers" who went under contract prior to November 6, 2009 are not eligible.  NOTE:  The deadline for closing was extended to September 30, 2010, provided the contract was signed and ratified on or before April 30, 2010.

What Types of Home Qualifies for the Tax Credit?
-All homes with a purchase price less than $800,000 qualify, including newly-constructed or resale, and single-family detached, townhomes or condominiums, provided that the home will be used as their principal residence. Vacation home and rental property purchases do NOT qualify. 

What if I Didn't Owe $8,000 in Federal Income Tax?  Is it Refundable?
-A refundable credit means that if the amount of income taxes you owe is less than the credit amount you qualify for, the government will send you a check for the difference.

-For example:
-A first-time buyer who qualifies for the full $8,000 credit who owes $5,000 in federal income taxes would pay nothing to the IRS and receive a $3,000 payment from the government. If you are due to receive a $1,000 refund, you would receive $9,000 ($1,000 plus the $8,000 first-time homebuyer tax credit).
-A repeat buyer who owes $5,000 would pay nothing to the IRS and receive $1,500 back from the government. If you are due to get a $1,000 refund, you would get $7,500 ($1,000 plus the $6,500 repeat buyer tax credit).
-All qualified homebuyers can take the tax credit on their 2009 or 2010 income tax return. 

Do I Ever Have to Repay the Credit?
The tax credit is a true credit. It does not have to be repaid unless the home owner sells or stops using the home as their principal residence within three years (to the date of sale - not just month of sale) after the purchase. 

*************Special Rules for Members of the Military, the Foreign Service and the Intelligence Community Congress has acknowledged the unique circumstances affecting members of the military, the foreign service and the intelligence community by making the following exceptions that apply to both the $8,000 tax credit for first-time home buyers and the $6,500 tax credit for repeat home buyers. Exemption From Tax Credit Recapture Rules Typically, homes that are sold or that cease to be used as a principal residence within three years of the initial purchase are subject to recapture of the tax credit. However, qualified service members who sell or move from a tax credit home within three years of the initial purchase due to official extended duty are exempt from the recapture rule. Extension of Tax Credit Deadlines The home buyer tax credit is available for qualified purchases with a binding sales contract in place on or before April 30, 2010 and closed by June 30, 2010. However, for qualified service members who are ordered on a period of official extended duty, these dates are extended for one year. For these home buyers, the tax credit applies to sales with a binding sales contract in place on or before April 30, 2011 and closed by June 30, 2011. A person who is forced to return to the U.S. for medical reasons before completing an assignment of at least 90 days of qualified official extended duty outside of the United States may qualify for the one-year extension. Definitions “Qualified service member” means a member of the uniformed services of the U.S military, a member of the Foreign Service of the U.S., or an employee of the intelligence community. “Official extended duty” means any period of extended duty outside of the United States for at least 90 days during the period beginning after December 31, 2008 and ending before May 1, 2010.