Great news for home buyers! On July 30, 2008, Congress passed a housing bill for a temporary tax credit to first time home buyers who have not owned a principal residence in the last three years prior to purchase. The property must be a single family residence (including condos) that will be used as a principal residence and it must be located in the United States. To qualify buyers must purchase the property between April 9, 2008 and July 1, 2009, and they must have an adjusted gross income of no more than $75,000 ($150,000 on a joint return) to receive the full credit. The credit phases out above $95,000 ($170,000 on a joint return). The property cannot be financed by means of mortgage revenue bonds (i.e. financing programs offered by a state housing agency. In South Dakota, SDHDA loans). The credit is ten percent of the cost of the home not to exceed $7500. The tax credit is included in a purchaser’s income tax and therefore buyers do not have to apply for the credit prior to purchasing the property. It can be claimed on the IRS Form 1040 tax return. If the buyer’s income tax liability is $5000, they will receive a tax credit refund of $2500. This tax credit is structured as an interest free loan and includes a recapture clause. The recapture is 6.67 percent of the credit amount received spread over fifteen years. If a buyer receives the full $7500 they will have to pay back 6.67% ($500 per year) of their credit each year for fifteen years. The only catch is the government has not decided exactly how the credit will be repaid. In the event someone who has taken the tax credit decides to sell the home before the 15th year, the remaining balance is due. If a seller still owes $4000 at the time of sale and nets $20,000 of proceeds, the title company will remit $4000 of the proceeds to the IRS and the seller will receive the remaining $16,000. If a seller only makes $2000 off the sale and still owes $4000, the remaining $2000 owed will be forgiven.