First-Time Homebuyers Credit. The first-time homebuyer credit was included in the Housing and Economic Recovery Act of 2008 and equals 10% of the home purchase price with a maximum of $7,500 for homes bought in 2008, and $8,000 for homes bought in 2009. For homes bought in 2008, the credit generally operates as an interest free loan repayable over 15 years. For purchases after 2008, the 15-year repayment requirement does not apply. The entire outstanding credit generally becomes due if the taxpayer disposes of the home or ceases using it as a principal residence within 36 months of the purchase date. The WHBA Act includes the following modifications to the first-time homebuyers credit:

• Extends the eligibility period for the credit to cover homes purchased prior to May 1, 2010, or for which a binding contract is in place before May 1, 2010 if the purchase closes before July 1, 2010.
  
  
• Provides additional benefits to military personnel (including Foreign Service members and intelligence community members) by:
  
  
  • Waiving the credit recapture rules in the case of a disposition of a principal residence or cessation of use of the home as a principal residence in connection with government orders received by the individual or the individual’s spouse for qualified official extended duty.
    
    
  • Extending the eligibility period for the credit for one year for military personnel serving outside the United States for at least 90 days between January 1, 2009 and April 30, 2010, meaning that those members of the military, intelligence community, and Foreign Service will qualify for the credit if they purchase a home before May 1, 2011 (or enter into a binding contract for the purchase of a home before May 1, 2011 and close on the purchase before July 1, 2011).
    
    
• Continues to allow taxpayers purchasing a principal residence after December 31, 2008 to accelerate receipt of the credit by electing to treat the purchase as having been made on December 31 of the prior calendar year and taking the credit on the prior year’s tax return.
  
  
• Increases the income thresholds for phase-out of the credit to $125,000 for single individuals (from $75,000) and to $225,000 for married couples filing joint returns (from $150,000).
  
  
• Limits eligibility for the credit by disallowing the credit if the purchase price for the home exceeds $800,000, requiring that the taxpayer or the taxpayer’s spouse be age 18 or older to claim the credit, and providing that individuals who can be claimed as a dependent of another taxpayer for the taxable year that the credit is claimed are ineligible for the credit.
  
  
• Prohibits taxpayers from claiming both the District of Columbia first-time homebuyer credit and the general first-time homebuyer credit.
  
  
• Allows long-time homeowners (individuals who have owned and used the same residence for five consecutive years during the prior eight years) to receive a reduced credit on the purchase of a new residence. The credit is reduced to $6,500 (from $8,000) for married couples filing jointly and to $3,250 (from $4,000) for single individuals or married filing separate returns.

For more details about the Federal Tax Credit, please go to www.FederalHousingTaxCredit.com or the IRS Website.