Things to know about the $8,000 Home Buyer Credit

In the past few weeks I've been getting scores of calls from homebuyers who have been sitting on the sidelines asking about the tax credit for first-time homebuyers, which was proposed by President Obama in early March and passed by Congress.
 
My simple answer: It's a really good deal.  Up front, let's answer some questions.
 
Who Qualifies for the Tax Credit?
 
You must have not owned a home within the last 3 years, determined by the HUD 1 date when previous home was sold. Additionally, you must not have purchased a home to be a primary residence between Jan. 1 and Nov. 30, 2009, and you must not have owned a rental property or vacation home which was not used as a primary residence over the last 3 years
 
If married and one person owned a home within the last 3 years, and the other did not, they do not qualify. If unmarried and one person owned a home within the last 3 years and other did not, they can "designate" the tax credit to the one who is considered the First Time Homebuyer.
 
However, if parents cosign on a mortgage (and own a home) and the child is a First Time Homebuyer, the parents are eligible for the tax credit.
 
Non-US Citizens may qualify if they meet resident-alien status.  Revenue or Housing Bond financing are eligible for tax credits.

What Types of Properties are Eligible?

Only the Primary Residence, single family, 2-4 units (must occupy one unit) town homes, condos, manufactured homes, mobile homes and houseboats.
 
New Construction is also eligible. The "Purchase Date" is the date the owner occupies the home (between Jan. 1 and Nov. 30, 2009). Those who owned the land and are in the process of building are also eligible.

What are the Income Limits?

Single persons making under $75,000, with partial credits up to $95,000, and married couples making up to $150,000, with partial credit up to $170,000. This is based on the Adjusted Gross Income line on IRS Form 1040, 1040A or 1040EZ.

Amount of Credit

Ten percent of sales price, up to a maximum of $8,000. The IRS grants a Partial Tax Credit if income exceeds $75,000 (singles) or $150,000 (couples).  

Repayment of Tax Credit

If first time home is sold within 3 years, the entire tax credit needs to be repaid. After three years, no repayment is due.

As always, buyers should check with their tax advisor on how it will affect their individual tax returns.

Casey Margenau is a Realtor with Re/Max Distinctive Real Estate, Inc. in McLean. He was ReMax's Top Producer Worldwide from 1999-2003, and is a member of its Hall of Fame. He may be reached directly at 703-827-5777, or on the web at www.margenau.com.