In one instance I was asked to figure out if a first-time homebuyer would still qualify for the credit if they were relying on co-signors to qualify for their mortgage who were not first-time homebuyers.  The answer? Yes, the first-time homebuyer still qualifies.

In the other instance I was asked to see if a household would qualify for the credit if they bought a home in 2009 when their household income was less than $150,000 in 2008 but was expected to be greater than $150,000 in 2009 ($150,000 is the income threshold for spouses filing jointly at which the credit phases out).  The answer? I am 95% sure they do qualify because the IRS will allow you to apply for the credit by amending your 2008 tax returns using the form 5405.

Do you have a question about whether or not you qualify for the credit?  Here is the link to the IRS’s website regarding the first-time homebuyer credit.

Please leave a comment below if you would like to explain your unique circumstance.

*Who qualifies for this credit? Anyone who buys a home from April 9, 2008-June 30, 2009 January 1, 2009-November 30, 2009 who is buying their first home or who had not owned a new home in the previous 3 years from the date of purchase.

*What are the terms of the credit? The credit is actually an interest-free loan (under the new law there is no repayment obligation) worth up to $7,500 $8,000 for couples filing jointly or $3,750 $4,000 for those who file individually.  A tax credit is different from a tax deduction in that it actually reduces your tax liability dollar for dollar (whereas a tax deduction reduces your taxable income which means your tax liability is only reduced by the amount of the deduction times your marginal tax rate). As an example, if you were expecting a tax refund for $2,500 you’d actually get $10,000 ($7,500 more) with the tax credit.

However, you don’t get to keep this tax credit money for ever. The IRS will then collect $500 per year ($250 for individuals) for 15 years from your tax refund (or added to your tax bill) to repay the credit. Although this is kind of drag this is still a great deal.

*How much will this help? It’s difficult to say for sure how much of an impact this will have. However, if I were a first time home-buyer and didn’t have a down-payment saved up one possibility for me would be for me to borrow $7,500 from a family member or close friend to use towards a down payment (FHA loans only require 3% down so I could buy a $250,000 home and put 3% down with this tax credit) and then pay back the loan when my tax refund became available.

The tax credit does phase out for individuals earning $75,000+ & couples earning $150,000+.