This is a one-time refundable credit taken on Form 5405. For 2009 and 2010 the following rules apply:

The credit is the lesser of $8,000 ($4,000 for MFS) or 10% of the pur- chase price and applies to homes purchased 1/1/09 – 4/30/10. Available for principal residences located in the U.S. The credit is phased out for higher income taxpayers.

A taxpayer can elect to treat a home purchased during the year as purchased on December 31 of the preceding year (thus, the credit for a home purchased in 2009 can be claimed on the 2008 return, and the credit for a home purchased 1/1/10 – 4/30/10 can be claimed on the 2009 return). Beginning 11/7/09, the following rules also apply: Long-time residents of the same principal residence are treated as first-time homebuyers. But, their credit equals the lesser of $6,500 ($3,250 for MFS) or 10% of the purchase price. No credit is allowed if the purchase price exceeds $800,000. No credit is allowed unless the taxpayer attaches a copy of the purchase settlement statement to his return.

To claim the credit, an individual must be at least age 18 and cannot be claimed as a dependent. If married, only one spouse has to meet the age test. Homes purchased from a related party do not qualify. An individual who has maintained the same principal residence for any five consecutive years during the eight-year period ending on the date of the purchase of a subsequent principal residence is treated as a first-time homebuyer beginning 11/7/09.

If you have any questions you would like to see answered in this column, please contact the author directly: Judith Plovie E.A. H&R Block Premium, Royal Oak (248) 543-2008