The American Recovery and Reinvestment Act of 2009 (H.R. 1) increases the first-time home buyer tax credit to $8,000 and eliminates the repayment requirement for buyers who purchase a home between Jan. 1, 2009 and Dec. 1, 2009.
A first-time buyer is defined under the tax credit as an individual who has not owned a home in the last three years.
For married joint filers, both must meet the first-time home buyer test to take the credit on a joint return.
Only principal residences including single family, townhouses and condos are eligible properties. Buyers claim the credit on their federal tax return to reduce their tax liability. If the tax liability is less than the credit, the buyer will still receive a refund check for the difference.
Individuals with an adjusted gross income up to $75,000 (or $150,000 if filing jointly) are eligible for the full tax credit. The credit is phased out for higher earners and is not available for those with an income above $95,000 (or $170,000 if filing jointly).
If the buyer stays in the home at least three years, the new tax credit does not have to be repaid. However, if the home is sold before that, the entire amount of the credit is recaptured on the sale.
Those who purchased homes under the 2008 $7,500 tax credit program will still be required to repay that credit to the government over a 15-year period, starting in 2010.
For more information go to 9 Facts You Should Know about Illinois Housing Markets.