To qualify as a first-time homebuyer, you cannot have owned an interest in a principal residence in the past three years from the date of the qualifying purchase.

To qualify for the full amount of the tax credit, you must earn no more than $75,000 if filing as Single or Head of Household. If filing a joint return, the buyers may have a combined income of no more than $150,000. There is a phase out of the credit if reported income is more than $75,000.

The tax credit allows you to deduct the credit from your total tax liability for the year in which the credit is taken. Also, the tax credit is “refundable,” meaning that the taxpayer can receive a tax refund if the credit is greater than the estimated liability.

This tax credit must be repaid. However, the repayment period is 15 years unless the home is resold before the end of that period, and there is no interest on the amount of the credit that is received. Repayment of the credit begins two years after the credit is claimed and is repaid in increments of 6.67% per year of the credit amount.

Essentially, the tax credit is a 15-year interest free loan from the government. Money today is worth more than an equal amount of money in the future, making the tax credit a fantastic opportunity that any first-time homebuyer cannot afford to miss.

View the complete text of H.R. 3221 in PDF format, or visit the Library of Congress and search for Bill Number H.R. 3221.