The Worker, Homeownership and Business Assistance Act of 2009 extended the tax credit of up to $8,000 for first time home buyers purchasing a principal residence. It also added another tax credit of up to $6,500 for qualified repeat home buyers.

Here are a few of the important points in the bill relating to these tax credit opportunities.

Who is eligible for tax credits?

• First-time home buyers, or buyers who have not owned a principal residence during the three-year period prior to the purchase, may be eligible for a tax credit of 10% of the price of the home, up to a maximum of $8,000.
• Repeat buyers, or existing home owners who have lived in their principal residence for five consecutive years out of the last eight and are purchasing a home to be their principal residence, may be eligible for a tax credit of 10% of the home purchase price, up to a maximum of $6,500.
• All U.S. citizens who file taxes are eligible to participate in the program.

Are there income limits to qualify for these tax credits?

• Home buyers who file as single or head-of-household taxpayers can claim the full credit ($8,000 for first-time buyers and $6,500 for repeat buyers) if their modified adjusted gross income (MAGI) is less than $125,000.
• For married couples filing a joint return, the combined income limit is $225,000.
• Single or head-of-household taxpayers who earn between $125,000 and $145,000, and married couples who earn between $225,000 and $245,000 are eligible to receive a partial credit based on a sliding scale.
• The credit is not available for single taxpayers whose MAGI is greater than $145,000 and married couples with a MAGI that exceeds $245,000.

What types of homes qualify for the tax credits?

• All homes including modular homes or manufactured homes with a purchase price of less than $800,000 qualify for the tax credits, including newly constructed or resale, provided that the home will be used as their principal residence. Vacation home and rental property purchases do NOT qualify.

Are these tax credits refundable?

• A refundable credit means that if the amount of income taxes you owe is less than the credit amount you qualify for, the government will send you a check for the difference.
• For example:
  • A first-time buyer who qualifies for the full $8,000 credit owes $5,000 in federal income taxes would pay nothing to the IRS and receive a $3,000 payment from the government. If you are due to receive a $1,000 refund, you would receive $9,000 ($1,000 plus the $8,000 tax credit).
  • A repeat buyer who owes $5,000 would pay nothing to the IRS and receive $1,500 back from the government. If you are due to get a $1,000 refund, you would get $7,500 ($1,000 plus the $6,500 tax credit).
• All qualified home buyers can take the tax credit on their 2009 or 2010 income tax return.

Do these tax credits have to be paid back?

• The tax credit is a true credit. It does not have to be repaid unless the home owner sells or stops using the home as their principal residence within three years after the purchase.

Where can I find more details on the tax credits?

• NAHB has a consumer Web site that provides comprehensive information on the tax credit. The Web site is http://www.federalhousingtaxcredit.com.

Please note that this information is for information only. It should not be used in place of a consultation with your professional tax, accountant, legal or other trained adviser. There are no guarantees of timeliness, completeness or accuracy. You should consult with one of these qualified professionals with all of the facts that apply to your particular situation before making any decision or taking any action as a result of this information.