What About This New Homebuyer Tax Credit?

People have been asking me about the new credit for first time buyers included in the Housing Rescue Bill. For qualifying home purchases after April 11, 2008 and before July 1, 2009, the Act provides eligible first-time homebuyers a refundable (Yes, it has to be paid back!) tax credit equal to the lesser of 10% of the purchase price of a principal residence or $7,500 ($3,750 for married individuals filing separately). The credit phases out for individual taxpayers with modified adjusted gross income between $75,000 and $95,000 ($150,000-$170,000 for joint filers) for the year of the purchase. A taxpayer is considered a first-time homebuyer if he (or spouse, if married) had no ownership interest in a principal residence during the 3 year period before the purchase of the home to which the credit applies.