What Aspects of the Original Credit Remain?
Up to $8,000 Credit for New Buyers: First-time home buyers remain eligible for a credit of as much as 10% of the purchase price of a new principal residence, up to a maximum $8,000. "First-time" is still defined as buyers who haven't owned a principal residence for a three year period prior to the home purchase (including both partners of a married couple).
Three Year Principle Residence Window: Neither the New Home Buyer Credit nor the Repeat Home Buyer Credit needs to be repaid provided that the buyer(s) reside in the home for a period of three years following the purchase If within 36 months of the date of purchase the property is no longer used as the taxpayer's principal residence, the taxpayer is required to repay the credit. Repayment of the full amount of the credit is must be included with the income tax return for the year in which the home ceased to be the taxpayer's principal residence. The full amount of the credit is reflected as additional tax on that year's tax return.
Tax Credit <> Not Deduction: The credits offer a refundable dollar-for-dollar reduction in what the taxpayer owes. For example, a taxpayer who owes $10,000 and qualifies for the full $8,000 tax credit would only owe the IRS $2,000. This offers a greater savings than a tax deduction.
The term refundable means that either of the home buyer credits can be claimed even if the taxpayer has little to no federal income tax liability to offset. If the qualifying credit exceeds the taxpayers liability, the government would refund the excess portion of the tax credit. For example, if you qualify for an $8,000 credit but only owe $5,000 in tax, you could receive a $3,000 check from the Internal Revenue Service.
Tax Return Filing Options: 2009 home buyers may claim the credit on either their 2008 or 2009 returns, while 2010 buyers can claim the credit on either their 2009 or 2010 returns.