First Time Home Buyer Tax Credit

What is it?

It’s a $7,500 tax credit for qualified first time home buyers purchasing homes between
April 9, 2008 and July 1, 2009. If the home purchase price is less than $75,000, the
tax credit will equal 10% of the purchase price. The tax credit is refundable, so the
buyer will receive the full credit even if it exceeds his or her tax liability. For many
people, this will mean getting a sizeable check from the government. Buyers can
even elect to have their qualified 2009 purchase count as a 2008 purchase so they
can claim it on their 2008 tax return.

The credit must, however, be repaid. It is structured as a zero-interest 15-year loan,
where the payments are added to your federal tax liability on an annual basis and your
first payment is due 2 years after the credit is claimed. For example, if you claim the
tax credit on your 2008 tax return, your first payment of $500 will not be due until your
2010 tax return is filed. If you sell your home prior to complete repayment of the
credit, the remaining credit amount will be due from the profit on the home sale; if your
profit is insufficient, the remainder of the credit payback will be forgiven.

You are eligible if:
• you (and your spouse, if applicable) have not owned a principal residence
within the last 3 years;
• your modified adjusted gross income (MAGI) does not exceed $75,000 if
you file as an individual taxpayer or $150,000 if you file a joint return (partial
credits are available for MAGIs up to $95,000 and $170,000, respectively);
• you are a U.S. citizen or you are not a nonresident alien; and
• you purchase a home as a primary residence and the closing occurs on or
after April 9, 2008 and prior to July 1, 2009.

Exceptions:

*If you stop using your home as your primary residence (i.e. converted to a rental or vacation home), all remaining installments become due on the return when that happens.
*If you sell your home, all remaining installments become due on the return for the year of the sale. The repayment is limited to the gain on the sale, if the home is sold to an unrelated taxpayer. If there is no gain, or a loss, the repayment may be reduced or maybe even eliminated.
*If you transfer your home to your spouse, as a result of a divorce settlement or otherwise, that person is responsible for making all subsequent payments.
*If you die, all remaining installments are not due. If you filed a joint tax return and then you die, your surviving spouse would be required to repay his/her one-half of the remaining payment.

Jennifer Cunnington
Senior Loan Consultant
(503) 699-6439 Office
(503) 358-1687 Cell
www.equityhome.com/jenniferc

For tax advice, please consult your tax advisor.