Hello Cashseeker, thanks for your question. You are not alone if you are confused about the tax credit - there is a lot of misinformation floating around. Hopefully, I can help you understand if you qualify for the tax credit, and explain how you can take advantage of it.
First, let's discuss who is eligible for the tax credit: 1) First time homebuyers OR buyers who have not owned a home in the past 3 years. In other words, if you have not owned a home in the 3 year period prior to your closing date, you are qualified to take the tax credit. For example, if you sold a home in May 1, 2005, then rented for awhile, then purchased another home on May 2, 2008, you qualify for the tax credit. AND 2)Your adjusted gross income cannot exceed $95,000 if you are single, or $170,000 if you are married filing jointly.
Now, there are two forms of the tax credit, depending on when you purchase(d) your home. If your closing date was between April 9, 2008 and December 31, 2008, you may take the $7,500 refundable tax credit. If you ordinarily get a refund at the end of the year, you will receive $7,500 MORE than you normally would! BUT, this credit is refundable, meaning you will have to pay it back if you take it. The payment schedule is very simple - starting with your 2010 tax year filing (in 2011), you will pay back $500 per year for 15 years, but you don't have to write a check - it is withheld from your normal tax refund for each of those 15 years. This is an INTEREST-FREE LOAN, people! If you sell your home before you've fully paid back the $7,500, the balance will be taken out of your profit, but if you don't have enough profit to cover the balance, the remainder is forgiven.
The second type of tax credit is the $8,000 NON-REFUNDABLE tax credit. This tax credit applies to purchases closed between January 1, 2009 and December 1, 2009. Unlike the first type of tax credit, this one DOES NOT have to be repaid - THIS IS FREE MONEY, HONEY! It's simple, just buy a home between January 1st and December 1st of this year, and you will be entitled to receive a check for $8,000 from the government! The best part is this: you don't have to wait to file your 2009 taxes to get the money - you can amend your 2008 return (consult a qualified tax professional), claim the 2009 tax credit, and get your money as soon as your amended return is processed by the IRS! SERIOUSLY, FREE MONEY that you can use to fix up your new home, or pay someone back who loaned you the money for your down payment! And they say money doesn't grow on trees...!
The only catch is this: the amount of the tax credit may be less than $8,000 (or $7,500, which ever type of tax credit applies to you). The amount of the tax credit you may take is the lower of $8,000 ($7,500 if applicable), or 10% of the purchase price. In other words, if you bought a home for $50,000 (good luck finding that home!), you could only take a $5,000 ($50,000 X 10%) tax credit. As long as the home you purchase is $80,000 or more, you qualify for the FULL tax credit!
Now, with interest rates and prices so low and FREE MONEY waiting to be claimed by qualified home buyers, what are you waiting for?!?! Pick your share off the money tree - Call a REALTOR today!