The new Credit is an $8,000 REFUNDABLE Tax Credit (or up to 10% of the purchase price).

So if the property is $75,000, the credit is only $7,500. (Assume a property over $80,000 for the rest of the discussion).

Refundable means that if your total tax liability in the given year is less than $8,000, the IRS will send a refund for the balance.

Many taxpayers do not have tax liability that exceeds $8,000.

For example, according to the 2008 IRS Tax Tables:

A single filer would need $46,600 in taxable income to have $8,000 in tax liability.

A couple would need $58,600 in taxable income to have $8,000 in tax liability.

Those with less tax liability will in most cases get a refund meaning they get the full value of the credit.

Defined as someone who owned another main home at any time during the three years prior to the date of purchase.

For example, if you bought a home on January 15, 2009, you cannot take the credit for that home if you owned, or had an ownership interest in, another home at any time from January 15, 2006 through January 15, 2009.

So if the last time you owned a home was 2005, you are eligible for the credit even though it is really not your “first” home.

For married joint filers, both must meet the 1sttime homebuyer test to take the credit on a joint return.

This means that for singles making over $75,000 and couples making over $150,000, the credit is proportionately reduced as incomes approach $95,000 and $170,000 respectively.

So if a couple makes $165,000, the excess amount is used to create a fraction 15,000/20,000 (.75) times the credit amount. 75% or $6,000 of the credit would be disallowed.

They would still get a $2,000 credit.

The home must be located in the United States.

Vacation homes and rental properties are not eligible.

For new construction, the “purchase date” is the date you occupy the home. So the move in date must be before December 1, 2009.

If the home is sold prior to three years of ownership, the tax credit must be repaid.

This is an improvement from the prior credit. That credit needed to be repaid in total over 15 years or the balance had to be repaid on sale.

This provision is designed to prevent flipping homes in order to get the credit.

The new credit is available to residents of the District of Columbia

Purchasers who utilize state/local revenue bond financing can now use the credit.

Purchasers who bought before January 1, 2009 are still subject to the terms of the repayable credit.

It can be claimed on your 2008 Tax Return (to be filed by April 15, 2009), an amended 2008 Tax Return, or your 2009 Tax Return.