•In 2008 Congress created a $7,500 First-Time Homebuyer Tax Credit.

•It went into effect April 8, 2008 and was set to expire July 1, 2009.

•The big problem: It had to be repaid over 15 years. People viewed it as a debt and not a benefit.

NAR Proposes Changes

In 2008 NAR began advocating to:

•Remove the repayment feature of the credit

•Extend the credit to the end of 2009

•Make the credit available to every home buyer

Working with Realtorsฎ across the country:

We succeeded in removing the repayment requirement for 2009.

The credit has been extended to on or before November 30, 2009 and can be claimed by those who closed on homes on or after January 1, 2009. It is still repayable for 2008 purchases.

The credit has been expanded to $8,000.

But, it is still only for first time homebuyers

•The new Credit is an $8,000 REFUNDABLETax Credit (or up to 10% of the purchase price).

–So if the property is $75,000, the credit is only $7,500. (Assume a property over $80,000 for the rest of the discussion).

•Refundable means that if your total tax liability in the given year is less than $8,000, the IRS will send a refund for the balance.

•Many taxpayers do not have tax liability that exceeds $8,000.

–For example, according to the 2008 IRS Tax Tables:

•A single filer would need $46,600 in taxable income to have $8,000 in tax liability.

•A couple would need $58,600 in taxable income to have $8,000 in tax liability.

•Those with less tax liability will in most cases get a refund meaning they get the full value of the credit.

If any of the following:

–Your income exceeds the phase-out range. This means joint filers with Modified Adjusted Gross Income (MAGI) of $170,000 and above and other taxpayers with MAGI of $95,000 and above.

–You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.

–You stop using your home as your main home.

–You sell your home before the end of three years.

–You are a nonresident alien.

•Defined as someone who owned another main home at any time during the three years prior to the date of purchase.

–For example, if you bought a home on January 15, 2009, you cannot take the credit for that home if you owned, or had an ownership interest in, another home at any time from January 15, 2006 through January 15, 2009.

–So if the last time you owned a home was 2005, you are eligible for the credit even though it is really not your "first" home.

–For married joint filers, both must meet the 1sttime homebuyer test to take the credit on a joint return.