First Time Homebuyer Credit Who qualifies? A buyer who has not owned a principal residence during the 3 years prior to the purchase.  For married taxpayers, the law tests the homeownership history of both spouses. How to qualify? Close by 11/30/09 For newly constructed home, occupy by 11/30/09 Home purchased as principal residence Home cannot be purchased from a relative  Downpayment/Closing Cost: You can use funds from an IRA account of: Homebuyer Parent Grandparent Ancestor of individual or spouse A withdrawal is penalty free up to $10,000 to be used for the costs of a first-time home buyer. Tax benefits: Refundable credit of 10% of the purchase price up to $8,000 if AGI (Line 38 of return) is not over: Single - $75,000 Married filing joint - $150,000 Penalty: If property is no longer used as a principal residence within 3 years of purchase: pay back full amount of $8,000 credit Yearly itemized deductions from AGI: Property Tax Mortgage Interest Points paid PMI (private mortgage insurance) if AGI is less than: Single - $50,000 Married filing joint - $100,000 In hopes of spurring the housing industry, the recently enacted “American Recovery and Reinvestment Act of 2009” includes an enhanced tax credit for first-time homebuyers. The credit is available to taxpayers who have not owned a home for three years up until the date of purchase.  The new law increases the first-time homebuyer credit to a maximum of $8,000 for purchases made between January 1, 2009, and November 30, 2009.  Unlike the 2008 credit, homeowners do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date.  Taxpayers have a special option to claim the tax credit either on their 2008 tax returns, or their 2009 tax returns next year. You may remember that last year's Housing Act included a tax credit giving first-time homebuyers up to a $7,500 credit for buying a home between April 8, 2008, and December 31, 2008.  Unlike other federal tax credits, the credit for first-time homebuyers had to be paid back to the government equally over a period of 15 years (or earlier if the house is sold). So the credit was the equivalent of an interest-free loan from the government. For both credits, single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit, and the credit must be repaid if the house is sold within three years of purchase.