First, the basics about the program that you may have read before:

• First-Time Home Buyers that purchased between 1/1/09 and 11/30/09
• The Tax Credit is equal to 10% of the purchase price, not to exceed $8,000
• Principal Residence only (includes SFR, Condos, Co-ops, and Townhomes)
• Refundable Credit which means any unused credit will be issued to you in a check.
• Annual Income not to exceed $75K (single) or $150K (couple).
• No Repayment due for the $8,000 - True Tax Credit (as long as home is kept for at least 3 years. If home is sold within 3 years, repayment for tax credit is required)

Now for the things you may not have read about:

What defines a First-Time Home Owner?  Buyers who purchase any home which is utilized as their primary residence (new or resale) between January 1st and November 30th.  As defined, the Frist-Time Home Owner could not have owned a primary residence within the last 3 years.  For married couples, if one of the spouses has owned property within the last 3 years, they are both disqualified.  Ownership of a vacation home or rental property not used a Principal Residence does not disqualify a buyer as a first-time homeowner.

Income Clarification:  What is the Income Limitation to claim the Tax Credit?  The homeowners annual income can not exceed $75,000 to receive the full tax credit or $150,000 per couple to receive the full tax credit.  Are you automatically disqualified because your income is above these limits mentioned?  You are still qualified for the reduced refund if your MAGI (modified adjusted gross income) is above $75,000 (single) or $150,000 (married), but not above $95,000 (single) or $170,000 (married).  If your income is above $95,000 (single) or $170,000 (married) then you no longer qualify.  What is MAGI?  This term is defined by the IRS and is not your Adjusted Gross Income (AGI).  It’s a calculation of your AGI and personalized deductions.  It is best to seek an accountant for a clear understanding.

How is this tax credit different from the tax credit originally passed in July 2008?  The biggest difference is that this is a true tax CREDIT, not a deduction.  It is also no longer a loan, which means you will not need to pay it back over a period of time.  The only exception for this credit is that you must keep your home for at least 3 years.  If you sell your home before your third year, the refund would need to be paid back.

What does it mean that the tax credit is ‘refundable’?  Plain and simple, this is a credit and not a loan nor a deduction.  Any unused portion from your 2008 or 2009 taxes will be refunded to you in the form of a check or wire.  For example, if you owe the IRS $5000 in taxes, and your expected tax credit is $8000 then your net difference.... (for this and other FAQs Click Here)

Copyright 2009 - John Cannata (Reliant Mortgage Ltd) - First Time Home Buyer 2009