First-time homebuyers should begin planning now to take advantage of a new tax credit. Available for a limited time, the credit:

• Applies to home purchases after April 8, 2008, and before July 1, 2009.
• Reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar.
• Is fully refundable, meaning that the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax that they owe.

The credit operates much like an interest-free loan because it must be repaid in equal installments over a 15-year period. Taxpayers will claim the credit on new IRS Form 5405, First-Time Homebuyer Credit.

Only the purchase of a main home located in the United States qualifies. Vacation homes and rental property are not eligible. For a home that you construct, the purchase date is the first date you occupy the home.

Taxpayers who owned a main home at any time during the three years prior to the date of purchase are not eligible for the credit. This means that first-time homebuyers and those who have not owned a home in the three years prior to a purchase can qualify for the credit.

If you make an eligible purchase in 2008, you claim the first-time homebuyer credit on your 2008 tax return. If you make an eligible purchase in 2009, you can choose to claim the credit on either your original or amended 2008 return, or on your 2009 return.

The credit is 10 percent of the purchase price of the home, with a maximum available credit of $7,500 for either a single taxpayer or a married couple filing jointly. The limit is $3,750 for a married person filing a separate return. In most cases, the maximum credit will be available for homes costing $75,000 or more. The credit normally must be repaid over a 15-year period starting the second year after the year the credit is claimed.

The credit is reduced or eliminated for higher-income taxpayers. The credit is phased out based on your modified adjusted gross income. In general, for a married couple filing a joint return the phase-out begins at $150,000 and is completely phased out at $170,000. For other taxpayers, the phase-out range is between $75,000 and $95,000.

Not everyone will qualify for the credit. There are other rules that may impact your eligibility and decision to claim the First-Time Homebuyer Credit. Get all the information at IRS.gov.

Links:

• 1040 Central
• First-Time Homebuyer Credit Information Center

Source : irs.gov

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.. i thought the law was modified so that the loan no longer had to be paid back?

whats lame about this tax credit is that it doesnt account for the buyers who purhased homes at the PEAK back in 2006 (such as i), and have seen my $500k property value fall dwn to $330k current

I could use some advice on this.....I am 24, MFJ, with one child. My husband and I purchased our home Apr. 22, 2008 from my parents. We are therefore disqualified from the credit. Even though it would eventually be repaid, we could still really use that money. We did everything normally. We had rural housing, 30 year fixed rate from chase. I don't know if this makes any difference, but we rented the property for 2 years prior to our purchase. I now understand the reason for the disqualification, but I can show any amount of proof necessary to show that there is no way my mother would ever do anything to help me financially for free. I have made every single house payment, every insurance payment and every tax payment and it is really frustrating to not be able to get this money because of others who cheat and steal. Are there any options for me?

I have a question that I could use some help with. My husband and I bought our house from a family trust. The trust included my father, my aunt, and my uncle. Does anyone know if this disqualifies us from receiving this credit? I know you are disqualified if you bought it from a grandparent or parent, but since this trust also includes an aunt and uncle do I qualify?

Thanks!

THat is what I want to know. I would bet no, since the intent was get people to buy homes. Those of us who took advantage may be stuck. I read it only retroactively applies starting Jan 1. I would really like to not have to pay that back.

At the moment, you have to repay this First Time Home Buyer's Tax Credit over 15 years in 15 equal instalments. But, of course there are exceptions, please visit the Home Owner Tax forum and read about the exceptions.

Homeowner Tax - Ask TaxGuru

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Ask TaxGuru Please refer to the legal disclaimer.

I would appreciate it if anyone has the answer for this: I owe about $ 2,800 in taxes. I will be buying a home in May-June time frame and am eligible for the $ 8,000 tax credit which will actually give me a refund of about $5,200. I want to file an extension until October 15, 2009. Am I still to pay for the $2,800 obligation on April 15th? Can an extension be filed with the full anticipation that there will be actually be a refund when the home purchase is completed in may-June.?

Thanks very much

Im married and in the military living in Texas. My wife has previously owned a home with her ex husband(within the past 3 years) and we are now purchasing a home for ourselves. I am a first time homebuyer. My wife will be on the Title and Deed of Trust but her name isn't on the loan paperwork. The mortgage will be just in my name. Do I qualify for the 8,000 dollar tax credit?