The loss of the new home buyer down payment assistance/gift program in mid-2008 couldn’t have come at a worse time. With the real estate market already slowing dramatically, the disappearance of the most valuable incentive to purchase a new home hit builders hard in the third and fourth quarter of last year.

The replacement for the gift program, the “first time buyer tax credit” is not as valuable because it isn’t down payment assistance, which is what new buyers really need. But the good news is that it applies to more than the traditional definition of a first time buyer, and to more than new home sales.

Answers to your most common questions about the program are below.

What’s a first time home buyer?

Even though the tax credit is stated to be available for “first time home buyers” only, the definition of that term is broader than you would think. A “first time home buyer” is a buyer who has not owned a principal residence during the three year period prior to the purchase. So in fact, it really should be called the “haven’t owned in 3 years” buyer credit.

What if you have owned a home within 3 years but have rented it out?

You qualify, because the test is whether it was your principle residence. Same for ownership of a vacation home. It gets a little complicated for married couples, as the law tests the ownership history of both. So if you have not owned a home in the past three years, but your spouse has owned a principal residence, neither of you qualify for the first time home buyer tax credit.

What type of home qualifies?

First time home buyers purchasing any kind of home – new or resale – are eligible for the tax credit. This includes single family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and even houseboats!

How long is the credit available?

The home must be purchased before July 1, 2009.

What is the Amount?

The maximum credit amount is $7,500, for single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000. Those with more income qualify for a smaller credit.

How does the credit work?

The sale is reported on your tax return, and works like an interest free loan that must be repaid over a 15 year period. You can even choose which year, 2008 or 2009 you report it in under certain circumstances, even if the purchase actually occurs in the other year.

To learn more about the tax credit and other provisions, consult with your tax professional, and visit http://www.federalhousingtaxcredit.com.

– N. Mark Kramoltz © 2015