How do I receive the tax credit? Do I need to complete a form or application?
You simply claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary provided you qualify under the income limits and first time buyer status.

What about Income Limits for claiming the tax credit?
The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

What is "modified adjusted gross income"?
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.

If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceed the phase-out limits.

How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
The major difference is that the 2009 tax credit does not have to be repaid. The 2008 "credit" was essentially an interest-free loan. The 2009 tax incentive is a true tax credit, provided: home buyers use the residence as a principal residence for at least three years or face recapture of the tax credit amount.

What if I don’t owe large amount of taxes, is the tax credit refundable?
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even the entire amount of the refundable tax credit.

For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $6,000 and had tax withholding of $5,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. If the same taxpayer qualified for the $8,000 home buyer tax credit, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).

Is a tax deduction the same as a tax credit?
A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.