| First-time Homebuyer Tax Credit Provisions |
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The Housing and Economic Recovery Act itemporarily establishes a new tax credit for first-time homebuyers. The credit applies to home purchases made on or after April 9, 2008 and before July 1, 2009.
The “credit” works more like a no-interest 15-year loan. Once a new home is purchased, the homebuyer can claim the credit against their next federal income taxes. However, they will need to pay back the credit over the next 15 years by a surcharge on the homebuyer's annual income tax.
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For homebuyers with household income under $75,000 (or $150,000 for joint income households), the credit is equal to 10 percent of the purchase price of the home, not to exceed $7,500.
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Homebuyers with household income between $75,000 and $97,000 (up to $175,000 joint income) qualify for a pro-rated tax credit – or a portion of the $7,500.
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Homebuyers with household income above $97,000 ($175,000 joint) are ineligible for the credit.
First-time homeowners can recover the full amount of their eligible credit, regardless of their income tax owed. If the homeowner’s tax liability is under the $7,500 amount (or under the amount of the credit they are entitled to), the federal government will refund the difference as if it were a tax refund check.
It is important for those anticipating the credit to understand that:
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They are responsible for calculating and applying for the credit on their income taxes after they have purchased a home.
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They will be responsible to pay back the credit on their income taxes in equal installments over the next 15 years.
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The credit cannot be taken if they used any tax-exempt financing (mortgage revenue bond financing) to finance their mortgage. For example, the homebuyer cannot take the credit if they purchased their home through the OHCS Rate Advantage program.
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Non-resident aliens are not eligible for the credit.
First-Time Homebuyer Tax Credit -  FAQ
(Source: National Association of Realtors)
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Housing and Economic Recovery Act Main Page
Housing and Economic Recovery Act Summaries and FAQs
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Contact:
John Fletcher
Senior Policy Advisor
503-986-6721
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