The Housing and Economic Recovery Act of 2008 authorizes a $7,500 tax credit for qualified first-time homebuyers purchasing homes on or after April 9, 2008 and before July 1, 2009. The following questions and answers provide basic information about the tax credit. As with any tax law change, you should consult a qualified tax advisor or legal professional about your unique situation if you have questions about using this provision.

Tax Credit Q&A (PDF)

The Basics

• Who is eligible to claim the $7,500 tax credit?
• What is the definition of a first-time homebuyer?
• What is the definition of a principal residence?
• Is there an income restriction?
• How is the partial credit determined for those whose income phases out?
• Are there any restrictions on the location of the property?
• Is the amount of the credit tied to the price of the home?
• How do I claim the tax credit? Do I need to complete a form or application?
• What types of homes will qualify for the tax credit?
• What is "modified adjusted gross income?"
• I am not a US citizen. Can I claim the tax credit?
• I have heard the tax credit is refundable, what does that mean?
• Isn't this tax credit actually an interest free loan?

Repayment Terms

• Does the credit have to paid back? What are the terms of repayment?
• When do I make the payment?
• Will the IRS put a lien on my property for the amount of the credit?
• What if I sell my house before the 15-year repayment period is complete?
• Why must the money be repaid?

Practical Questions

• Can I use my credit as part of my down payment?
• Is there a way for a homebuyer to access the money allocable to the credit sooner than waiting to file their tax return?
• What is the difference between a tax credit and a tax deduction?
• If I am qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
• Can I claim the credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
• Does the credit amount differ if you file as single or married? What if I buy the house with a friend or family member?
• Can I claim the credit if I buy a home from a relative?
• My fiance and I bought a house on June 1, 2008. We'll get married in 2009. I owned a home in 2006, but he has never owned a home. Will he get a credit?
• I have hired a contractor to construct a home on a lot I already own. Do I still qualify for the tax credit?