Questions and Answers to $7,500 Tax Credit

$7,500 First Time Homebuyer Tax Credit

1. How does a tax credit work?

Reduces income tax liability.
Credits are claimed on an individual's income tax return.
Maximum credit amount is $7500.

2. Who can use the new tax credit?

First-time homebuyers or individual who has not had an ownership interest in a principl residence in the previous three years.

3. What if my taxes due on my return are less than $7500?

The difference would be treated as an overpayment and the purchaser(s) would receive a tax
refund.

4. Is there an income restriction?

Based on tax filing status.
Single or head of household < $75,000.
Joint filing < $150,000.

5. Do individuals with incomes higher than the $75,000 or $150,000 limits lose all the benefit of the credit?

No, individuals making up to $95,000 and joint filers making up to $190,000 are eligible for a partial tax credit.

6. Is the amount of the credit tied to the price of the home?

Yes, credit is 10% of the cost of the home, maximum credit of $7,500.
Amount of credit is same for all taxpayers, married or single.

7. Are there property location restrictions?

Property must be located within the United States.

8. How do I apply for the credit?

Claim the credit on the appropriate IRS form 1040, or any special forms the IRS requires.
No pre-purchase authorization, application or similar approval process.

9. Can I use the credit amount as part of my downpayment?

Cannot claim the credit any earlier than the 2008 tax return that will be filed in 2009.

10. What is the repayment feature of the credit?

There is no precedent for repayment of a tax credit created for individuals at this time.

11. Terms for repayment?

Repaid in increments of 6.67% of the amount over 15 years.

12. When do I make a repayment?

Credits taken in 2008 will not be repaid until 2010.

13. Can the IRS put alien on my property for the amount of the credit repayment?

The statue does not grant the IRS that authority.

14. What if I sell my home before the 15-year repayment period?

Any amount of the unpaid credit will be reduced from any proceeds.
If there is a loss or the gain from the sale is less than the amount of the repayment then the liability is forgiven.
15. Any other exceptions to repayment?

If the person dies before credit is repaid the amount is disregarded
There are special adjustments to people who sell as part of a divorce and/or homes that are part of an involuntarily conversion.

16. If I received a refund of a portion of the tax credit because my total tax liability was less than the amount of my tax credit, do I have to repay the amount of the refund?

Yes

This should cover most of the questions. I do not see anything on the IRS website as of yet regarding this but you can call the IRS directly.