First-Time Homebuyer Credit

Taxpayers who purchased a home for the first time in 2009 are eligible for a tax credit of up to $8,000. The new Worker, Homeownership, and Business Assistance Act of 2009 extended the deadline for home purchase to May 1, 2010. The credit is for 10% of the purchase price up to a value of $8,000.

For homes purchased in 2008 and for the 2008 tax year, the credit is similar to an interest-free loan and must be repaid over 15 years starting in the second tax year after the taxpayer claims the credit. You will repay the credit on your tax returns. If you claim the $8,000 credit on your 2008 return, you will start repaying the credit on your 2010 return.

You must meet certain criteria to be eligible for the first-time homebuyer credit. Some high income taxpayers are not eligible for the credit. You cannot claim the credit in the following situations:

• You make above a certain modified adjusted gross income.
• You purchase your home from a relative or family member including a spouse, parent, grandparent, child, or grandchild.
• You stop using your home as your main home.
• You sell your home before the end of the year.
• You are a nonresident alien.
• You are or were eligible for the DC first-time homebuyer credit.
• You finance your homes through tax-exempt mortgage revenue bonds.
• You owned another main home for three years before the purchase date.

For homes purchased in 2008 and for the 2008 tax year, the first-time homebuyer credit is a 15-year interest-free loan and must be repaid in 15 equal annual installments as an additional tax on the taxpayer's tax return.

• If you die, you do not owe any more payments. If you filed a joint return, the surviving spouse will pay.
• If you stop using the home as a main home, all remaining annual installments are due during that tax year. This is a case if your home becomes a vacation home or rental property.
• If you sell your home, the remaining annual installments are due on the tax return for the year of sale.
• If you transfer your home to a spouse or as part of a divorce settlement, that person becomes responsible for installment payments.

For homes that were purchased in 2009 and 2010, the credit does not need to be repaid unless the home is no longer the taxpayer's main residence three years after the purchase. Taxpayers cannot claim the credit before the closing date.