If you’re confused by the status of the first-time homebuyer tax credit created by the government to help stimulate the economy, you’re not alone. As with most government programs, there are restrictions, guidelines and a whole lot of fine print. The first thing you need to know is that the original first-time homebuyer tax credit in July 2008 and applied to all qualified purchases on or after April 9, 2008. It was modified in the American Recovery and Reinvestment Act, with the revised credit effective for purchases on or after Jan. 1, 2009, and before Dec. 1, 2009.

To help you more fully understand the tax credit and what it means to you, we’ve outlined the basic features as defined by the original credit and how – if at all – they’ve changed with the revised version.

Amount of Credit

Original: Lesser of 10 percent of cost of home or $7,500.00.

Revised: Lesser of 10 percent of cost of home or $8,000.00.

Eligible Property

Original: Any single-family residence (including condos, co-ops, townhouses) used as principal residence.

Revised: No change. All principal residences are eligible.

Refundable

Original: Yes. Reduces (or can eliminate) income tax liability for the year of purchase. Any unused amount of tax credit refunded to purchaser.

Revised: No change. You will continue to receive fund for unused amount when tax return is filed.

Income Limit:

Original: Yes. Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000).

Revised: No change. Some income limits continue to apply.

First Time Homebuyer Only

Original: Yes. Purchaser may not have owned a principal residence in 3 years previous to purchase.

Revised: No change. It is still available for first-time purchasers only. Three year rule continues to apply.

Revenue Bond Financing

Original: No credit allowed if home financed with state/local bond funding.

Revised: Purchasers who utilize revenue bond financing can use credit.

Repayment

Original: Yes, Portion (6.67% of credit or $500) to be repaid each year for (15 yrs), starting with 2010.

Revised: No repayment for purchases on or after Jan. 1, 2009 and before Dec. 1, 2009.

Recapture:

Original: If home sold before 15-yr repayment period ends, the outstanding balance of the repayment will be recaptured on sale.

Revised: If home is sold within 3 yrs of purchase, entire amount of credit recaptured on sale. Started 2009.

Termination

Original: July 1, 2009 (But note program changes in 2009)

Revised: Dec. 1, 2009

Effective Date

Original: Purchases on or after April 9, 2008 and before Jan. 1, 2009. Repayment is to begin during 2010.

Revised: All revisions are effective as of Jan. 1, 2009.

DISCLAIMER: This information was summarized from Websites and Press Releases from various organizations including Government sponsored websites. FRG anticipates these programs will continue to change and be modified on an ongoing basis. FRG encourages you to review the Federal Government websites at www.Treas.gov.