Frequently asked questions ...

Q:  What is a Tax Credit?
A:  A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual´s primary residence.

Q: Who qualifies as a first-time homebuyer?
A: Buyers who have never owned a home or have never owned a home (primary residence) within the last three years.

Q: Who qualifies for the full tax credit amount?
A: Single taxpayers and married couples filing a joint return.

Q: What qualifies for the full tax credit amount?
A: Single family homes, condos and townhomes.

Q: What is the maximum purchase amount?
A: Eligible homebuyers may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. For example, if the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Q:What are the new deadlines in order to qualify for the tax credit?
A: An eligible homebuyer must enter into a binding contract to purchase a principal residence on or before April 30, 2010 and close no later than June 30, 2010. For qualifying purchases in 2010, homebuyers have the option of claiming the tax credit on either their 2009 or 2010 tax return. The tax credit would be extended until June 30, 2011 for servicemen and women serving overseas for at least 90 days.

Q: What are the income limitations for claiming the tax credit?
A: Homebuyers with higher incomes can now qualify.
    Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible. 
    Joint tax filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Q: Are there other restrictions to taking the first-time buyer tax credit?
A: Yes. According to the IRS, if any of the following describe a homebuyer´s situation, a credit would not be due:
     - They purchase the home from a direct relative (includes a spouse, parent, grandparent, child or grandchild)
     - They do not use the home as their principal residence
     - They sell their home before the end of the year
     - They are a nonresident alien
     - They owned a principal residence at any time during the three years prior to the date of purchase of your new home.

Q: Can homebuyers purchase a home from a step-relative and still be eligible for the credit?
A: Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.