Can I qualify for the first-time homebuyer tax credit?

Thanks to the $787 billion American Recovery and Reinvestment Act, first-time homebuyers now qualify for a tax credit of up to $8,000 from the federal government to help them to secure their first home. Unlike the 2008 tax credit of $7,500 that operates much like an interest-free loan and must be repaid through federal income tax returns over a period of 15 years, this tax credit does not require repayment if the homeowner stays at the home for 3 years. The tax credit for first-time homebuyers is subject to certain additional parameters.

Importance of the Tax Credit

The importance of the tax credit is that it puts money in the pockets of first-time homebuyers immediately, rather than having to wait a year to claim it on their tax returns. Another significant feature of the tax credit is that it does not have to be repaid.

Requirements to Qualify for the Tax Credit

To qualify for the tax credit, a list of requirements must be met:

• Borrowers must be first-time homebuyers. This includes buyers who may have previously owned a primary residence, but have not within the last three years of the closing.
• The home must be a primary residence purchased between January 1, 2009 and December 31, 2009 June 30, 2010 (with with a signed purchase agreement by April 30, 2010).
• The tax credit must be equal to 10% of the homes value (based on an appraisal, up to a maximum of $8,000 (couples who file taxes separately are eligible for the tax credit up to $4,000 each).
• First-time homebuyers must occupy the home for a minimum of three years. If the borrowers move, sell or leave the home for any other reason within those three years, the tax credit must be repaid.
• To qualify for the full $8,000 tax credit, single borrowers can have an income up to $75,000 $125,000. Couples filing jointly can have an adjusted gross income up to $150,000 $225,000.
• The tax credit is not required to be repaid, unless the homeowner sells, moves or leaves the home for any other reason.

Note: Corrected dates and income amounts indicated above reflect the changes implemented by Congress on November 6, 2009.