The time to receive the $8,000 Tax Credit is quickly disappearing but it can be confusing on whether you qualify or not! Use this helpful FAQ to get the quick facts on this great incentive for first time homebuyers!

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1. How much can I claim for the tax credit?

Borrowers can claim up to $8,000 or 10% of the home’s purchase price, whichever is less.

2. Who is eligible for this tax credit?

First time homebuyers, defined as those who have not owned a principal residence during the three year period

prior to purchase of the home. For married couples, their prior ownership applies to both the homebuyer and

his/her spouse.

3. Does this tax credit need to be repaid?

No repayment is necessary as long as the home is used as a principal residence for at least three years. If it is

not, the entire amount of the credit is recaptured. Certain exceptions apply. The $7,500 tax credit that is

available for qualified purchases in 2008 does require repayment.

4. How long is this tax credit valid?

The tax credit is valid on eligible homes purchased on or after January 1, 2009 and before December 1, 2009.

5. What properties are eligible for the tax credit?

Any home that will be used as a principal residence (including condominiums, co-ops and townhouses).

6. Are there income limit restrictions?

Yes. The tax credit amount is reduced for buyers with Modified Adjusted Gross Income (MAGI) of more than

7. How does this work with my tax refund or balance due?

The fact the credit is refundable means that the credit can be claimed even if the taxpayer has little or no federal

income tax liability to offset. The following scenarios will help explain.

Scenario 1:

If a qualified homebuyer expected federal income tax liability of $6,000 and had withholding of $6,000 for the

year, then without the tax credit the taxpayer would owe the IRS nothing. Suppose now the taxpayer qualified

for the $8,000 homebuyer tax credit. As a result, the tax payer would receive a refund check for $8,000.

Scenario 2:

If a qualified homebuyer expected federal income tax liability of $6,000 and had withholding of $7,000 for the

year, then without the tax credit the taxpayer would receive a refund of $1,000. Suppose now the taxpayer

qualified for the $8,000 homebuyer tax credit. As a result, the tax payer would receive a refund check for

$9,000.

Scenario 3:

If a qualified homebuyer expected federal income tax liability of $6,000 and had withholding of $5,000 for the

year, then without the tax credit the taxpayer would owe the IRS $1,000. Suppose now the taxpayer qualified

for the $8,000 homebuyer tax credit. As a result, the tax payer would receive a refund check for $7,000.

Scenario 4:

If a qualified homebuyer expected federal income tax liability of $10,000 and had withholding of $1,000 for

the year, then without the tax credit the taxpayer would owe the IRS $9,000. Suppose now the taxpayer

qualified for the $8,000 homebuyer tax credit. As a result, the tax payer would owe the IRS $1,000.

8. How do I apply for the tax credit?

You claim the tax credit on your federal income tax return. Specifically, taxpayers should complete IRS Form

5405 to determine their tax credit amount. No other applications, forms or pre-approvals are required.*

9. If I qualify and buy a home in 2009 can I choose to apply the credit to either 2008 or 2009?

Yes, the law allows the taxpayers to chose to treat qualified purchases in 2009 as if the purchase occurred in

2008. This means the income limitation tests for the year selected would apply. Previously filed 2008 tax

returns can be amended to claim the tax credit.

10. I qualify for the tax credit and I have already bought a home in 2009 but I have already filed to claim

on my 2008 tax return the $7,500 tax credit that I have to pay back. Can I claim the new $8,000 credit

instead?

Yes, taxpayers in this situation can file an amended 2008 tax return. You should consult with a tax advisor to

ensure you file this amended return properly.

11. Is this a good time for a first time homebuyer to purchase a home?

Absolutely! Interest rates are at historic lows and home prices are in general lower. Also, there is an abundance

of homes for sale, meaning you will have many options from which to choose. One thing to note is you will

need a down payment, but not to worry, there are low down payment programs available for first time

homebuyers.