First-time homebuyers are able to take an income-tax credit on their purchase, thanks to passage in Congress. The definition of first-time homebuyer is generous. To get the credit, the homebuyer cannot have owned a home in the previous three years. In additions:
- The home must be a principal residence and purchased between April 9, 2008 and July 1, 2009.
- The credit is equal to 10 percent of the purchase price, up to $7,500. Single taxpayers with modified adjusted gross income up to $75,000 and couples with MAGI up to $150,000 will qualify for full credit. Singles with MAGI up to $95,000 and couples with MAGI up to $170,000 will get a reduced amount. Those with higher incomes don't qualify.
- If the amount of tax a homebuyer owes is less than the amount of the credit, they get to keep the difference in the form of an IRS refund.
- The homebuyer must begin to repay the credit in two years in increments of about $500 a year over a 15-year period for those who received the full credit.
- Homebuyers who sell their home before the credit is repaid must pay off the loan with any profits. If they sell the home at a loss, the loan is forgiven.
We don't know how long Congress will continue with this Tax Credit for New Homebuyers.
