First-Time Home Buyers' Tax Credit Facts

The tax credit of up to $8,000 for first-time home buyers has been extended! The credit is available to first-time buyers purchasing a primary residence and does not need to be paid back.

Who is eligible
Tax credit amounts
Types of homes that qualify
Income limits
Purchase price limit
Effective dates
Tax credit refunds

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First-Time Buyer Tax Credit Summary
First-Time Buyer Tax Credit FAQs
IRS Form 5405 Instructions
IRS Form 5405

Who is eligible

• The tax credit is available for first-time home buyers only.
  
• The law defines a first-time home buyer as a buyer who has not owned a principal residence in the three-year period ending on the date of purchasing the new home.
  
• All U.S. citizens who file taxes and are not claimed as dependents on anyone else's tax return are eligible to participate in the program.
  
• All taxpayers who claim a credit must use the home as their primary residence for the next three consecutive years.

Tax credit amounts

The tax credit is worth 10% of the purchase price of the home. The maximum credit is $8,000, or $4,000 for married couples filing separately.`

Types of homes that qualify

All homes, whether single-family, townhomes, mobile homes or condominiums will qualify. The tax credit includes newly constructed homes.

However, there are conditions:

• The home must be used as a principal residence, and
• The buyer cannot have owned a home in the last three years.

A principal residence is a residence in which an individual lives most of the time. Individuals may qualify for the tax credit even if they own a vacation home or rental property as long as those properties were not their primary residence for at least three years preceding the purchase of their new home.

Income limits

The credit is phased out for individuals with modified adjusted gross income between $125,000 and $145,000. For married couples filing a joint return, the phase out range is $225,000 to $245,000.

For the purposes of determining income eligibility for this credit, adjusted gross income is modified by adding back the following excluded income:

• foreign earned income;
• income from Guam, American Samoa, or the Northern Mariana Islands;
• income from Puerto Rico.

Purchse price limit

No tax credit is available for homes over $800,000.

Effective dates

Qualified individuals will need to purchase a residence prior to May 1, 2010, and to close on the purchase prior to July 1, 2010.

Tax credit refunds

The credit is fully refundable. That means that a taxpayer who doesn't pay enough tax to offset the credit can get a refund. For example, if you qualify for an $8,000 credit but only owe $5,000 in taxes, you could receive a $3,000 check from the Internal Revenue Service.

People who purchase homes in 2009 may claim the tax credit on either their 2008 or 2009 returns. Those who purchase homes in 2010 may claim the tax credit on 2009 or 2010 returns.

This information is provided for general awareness only. It is not intended for the purpose of providing legal, accounting, tax advice or consulting of any kind. We encourage you to consult your tax advisor for more information.