The National Association of Home Builders has a website that explains in simple terms the $8,000 first-time homebuyer tax credit and the $6,500 repeat homebuyer tax credit. Located at www.federalhousingtaxcredit.com, the site provides details of the program that are easy to understand, including frequently asked questions.

"The Worker, Homeownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time homebuyers purchasing a principal residence. The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.

"For sales occurring after November 6, 2009, the Act establishes income limits of $125,000 for single taxpayers and $225,000 for married couples filing joint returns.

"The income limits for sales occurring on or after January 1, 2009, and on or before November 6, 2009, are $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns," the site goes on to explain.

$8,000 First-time Home Buyer Tax

Credit at a Glance

The $8,000 tax credit is for first-time homebuyers only. For the tax credit program, the IRS defines a first-time homebuyer as someone who has not owned a principal residence during the three-year period prior to the purchase.

The tax credit does not have to be repaid unless the home is sold or ceases to be used as the buyer's principal residence within three years after the initial purchase.

The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $8,000.

The tax credit applies only to homes priced at $800,000 or less.

The tax credit now applies to sales occurring on or after January 1, 2009, and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.

For homes purchased on or after January 1, 2009, and on or before November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly.

For homes purchased after November 6, 2009 ,and on or before April 30, 2010, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

The $6,500 Move-Up / Repeat Home Buyer

Tax Credit at a Glance

• To be eligible to claim the tax credit, buyers must have owned and lived in their previous home for five consecutive years out of the last eight years.

• The tax credit does not have to be repaid unless the home is sold or ceases to be used as the buyer's principal residence within three years after the initial purchase.

• The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $6,500.

• The tax credit applies only to homes priced at $800,000 or less.

• The credit is available for homes purchased after November 6, 2009, and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, the home purchase qualifies provided it is completed by June 30, 2010.

• Single taxpayers with incomes up to $125,000, and married couples with incomes up to $225,000, qualify for the full tax credit.

Some additional frequently asked questions include:

What types of homes will qualify

for the tax credit?

Any home that will be used as a principal residence will qualify for the credit, provided the home is purchased for a price less than or equal to $800,000. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats.

Instead of buying a new home from a homebuilder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?

Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been "purchased" on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009, and on or before April 30, 2010, (or by June 30, 2010, provided a binding sales contract was in force by April, 30, 2010). In contrast, for newly constructed homes bought from a homebuilder, eligibility for the tax credit is determined by the settlement date. To provide proof of purchase, homebuyers must attach a copy of the HUD-1 Form, or certificate of occupancy to IRS Form 5405.

Is a tax credit the same as a tax deduction?

No. 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. A tax deduction is subtracted from the amount of income that is taxed.

Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer's tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.

Of course, as with all purchases of this size, buyers are urged to use trusted sources and not to get caught by ruthless salespersons misrepresenting themselves.

When it comes to buying a home, always look before leaping.