1. Who is eligible to claim the $7,500 tax credit?
2. What is the definition of a first-time homebuyer?
3. What is the definition of a principal residence?
4. Is there an income restriction?
5. How is the partial credit determined if my income is higher than the limit?
6. Are there any restrictions on the location of the property?
7. Is the amount of the credit tied to the price of the home?
8. How do I claim the tax credit? Do I need to complete a form or application?
9. What types of homes will qualify for the tax credit?
10. What is "modified adjusted gross income?"
11. I am not a US citizen. Can I claim the tax credit?
12. I have heard the tax credit is refundable, what does that mean?
13. Isn't this tax credit actually an interest free loan?

ADDITIONAL INFORMATION

• Repayment Terms
• Practical Questions

1. Who is eligible to claim the $7,500 tax credit?
   First time homebuyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after April 9, 2008 and before July 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs.
   
   
2. What is the definition of a first-time homebuyer?
   The law defines a "first-time homebuyer" as a buyer who has not owned a principal residence during the three year period prior to the purchase. For married taxpayers, the statute specifically provides that for a married couple to be eligible for the credit, both must be first-time homebuyers. For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time homebuyer tax credit.
   
   By contrast, the statute directs the IRS to determine how the credit can be shared when two or more unrelated individuals purchase a home. In that case, the statute does not specify whether all the unrelated purchasers must be first-time homebuyers. In this case, you should check with your tax advisor.
   
   Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time homebuyer.
   
   
3. What is the definition of a principal residence?
   A principal residence is the home where an individual spends the majority of his/her time (generally defined as more than 50%).
   
   
4. Is there an income restriction?
   Yes. Individuals with an annual income of over $75,000 and married couples with a combined annual income of over $150,000 are phased-out, but may still be eligible for a partial credit. The credit becomes totally unavailable for individual taxpayers with a modified adjusted gross income (MAGI) of more than $95,000 and for married taxpayers filing joint returns with an MAGI of more than $170,000.
   
   
5. How is the partial credit determined if my income is higher than the limit?
   The statue specifies that the credit is phased out completely at $20,000 over the income limit. To determine the allowable credit, $20,000 is divided into the amount that the individual (or couple) is over the limit. The resulting percentage is multiplied by the amount of the tax credit . For Example:
   
   

   Couples Income:	$155,000
   Income Limit:	$150,000
   Excess Income:	$5,000

   In this example, the excess income of $5,000 is divided by $20,000. The disallowed portion of the credit is 25% or $1,875.
   ($5,000/$20,000 = 25% x $7,500 = $1,875)
   
   Stated another way, the couple allowed to receive 75% of the credit or $5,625.

6. Are there any restrictions on the location of the property?
   Yes, eligible property must be located in the United States.
   
   
7. Is the amount of the credit tied to the price of the home?
   Yes. The credit is for 10 percent of the cost of the home, up to a maximum of $7,500. If a home cost $65,000, the allowable credit would be $6,500.
   
   
8. How do I claim the tax credit? Do I need to complete a form?
   Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. No other applications or forms are required. No pre-approval is necessary; however, prospective home buyers will want to be sure they qualify for the credit under the income limits and first-time homebuyer tests.
   
   
9. What types of homes will qualify for the tax credit?
   Any home purchased by an eligible first-time homebuyer will qualify for the credit, provided that the home will be used as a principal residence and the buyer has not owned a home in the previous three years. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats.
   
   
10. What is "modified adjusted gross income?"
    Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.
    
    To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.
    
    
11. Can I claim the tax credit if I am not a US citizen?
    Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519.
    
    
12. I have heard the tax credit is refundable, what does that mean?
    The fact that the credit is refundable means that the homebuyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset it. Typically this involves the government sending the taxpayer a check for a portion or even the entire amount of the refundable tax credit. For example, if a qualified homebuyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that taxpayer qualified for the $7,500 home buyer tax credit. As a result, the taxpayer would receive a check for $6,500 ($7,500 minus the $1,000 owed).
    
    
13. Is this tax credit actually an interest free loan?
    Yes. Unlike most other tax credits, this tax incentive must be paid back. All eligible purchasers who claim the credit will be required to repay it over 15 years.