Here are the answers to some frequently asked questions:

Do I qualify?

Most importantly, you must be a first time homebuyer. You are a first time homebuyer if you have not owned home in THREE YEARS. The home you are purchasing must be in the United States and you must close on the home between January 1, 2009 and December 1, 2009. Construction of your first home qualifies as well, as long as you move in within this time frame.

There are income limitations, as well. Single folks can have up to $75,000 in taxable income, and married folks up to $150,000. Over that, the credit is phased out, completely gone at $95,000 if you are single and $170,000 if you are married.

How is the tax credit calculated?

The tax credit equals 10% of the purchase price for homes up to $80,000, and a flat $8,000 credit for homes purchased for more than $80,000. For example, if you buy a home for $62,000, you will receive a tax credit of $6,200.

What do I get? When do I get it?

You get $8,000 (or, of course, 10% of the purchase price, whichever is less)! You can either claim it on your 2008 tax return, your 2008 amended tax return, or your 2009 taxes. It is a pure credit – if you owed $8,000 in taxes, you now owe $0. If you are owed a $1,000 refund on your taxes, you will now get a $9,000 refund!

How does this differ from the 2008 tax credit?

The biggest difference is the fact that this credit does not have to be repaid. The 2008 tax credit needed to be repaid in $500 increments over 15 years. Not a bad deal, of course, but no repayment is definitely better! The income guidelines have stayed the same.

This sounds too good to be true… are there any hidden loopholes?

A few things to keep in mind… If you sell your home within the first three years, the credit must be repaid. This is to keep investors from taking advantage of this credit to flip properties. The repayment can be avoided if the sale is because of death, divorce, or natural disaster. Also, if you are buying your home from your mom or your sister, you do not get the tax credit. No family transactions allowed!

For more information, check out www.federalhousingtaxcredit.com or contact The Red House Realty Group with any questions!

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