If the mortgage interest, property tax, and slew of other homeownership tax deductions weren't enough, Congress has added yet another homeownership incentive: A dollar-for-dollar tax credit of $7,500 when you purchase a home. Want to know if you qualify? Here's an overview of this newest tax break:
Ten percent of the cost of the home, not to exceed $7,500.
Home buyers (including spouses) who have not owned a principal residence in the three years prior to the purchase. Those who do not own their principal residence but own a vacation home or other property also qualify for the credit if they are purchasing a principal residence.
Any single-family home, town house, condominium, or co-op that will be used as a principal residence.
Taxpayers with adjusted gross incomes of up to $75,000 for singles and $150,000 for couples qualify for the full credit. A partial credit is available to taxpayers who make more than those amounts, not to exceed $95,000 for singles and $170,000 for joint filers.
The credit is available to those who purchase a home between April 9, 2008, and July 1, 2009.
The credit will reduce any tax liability owed for the year. If there is excess, the money will be refunded. For example, if you owed $1,000 in taxes and used the $7,500 credit, you could receive a rebate check of $6,500.
Two years after claiming the tax credit, a portion must be repaid each year for 15 years, essentially making the tax credit an interest-free loan. For those qualifying for the full $7,500 credit, the payback amount is $500 per year. Those not receiving the full credit pay equally over the 15 years at a rate of 6.67 percent per year. If a home is sold before 15 years, then the remainder of the credit would be repaid from the sale profits. If the home was sold at a loss, the remaining credit payback would be forgiven.