Q: I just read your article “Buyers want a second shot at tax credit” in the Chicago Tribune and wanted to clarify one thing.

I am a first-time homebuyer and you said at the end the income restrictions were $95,000 for individuals. I thought the old credit was prorated after $75,000 income. Is this the same way or is the full $8,000 tax credit available up to $95,000 in income?

I will be filing this on my 2009 income taxes so want to make sure I do it correctly. Also, I see you’ve written about the $15,000 tax credit legislation that has been proposed. How realistic do you think it is and do you think it will pass?

Thanks very much.

A: Here’s what you need to know: An individual first-time buyer (or someone who has not owned a home in three years), who has an adjusted gross income of up to $75,000 can qualify for up to the full $8,000 tax credit. The tax credit is structured as 10 percent of the purchase price up to $8,000. Married couples may earn up to $150,000 and qualify for the full amount of the tax credit.

The tax credit begins to phase out over $75,000/$150,000 and phases out completely at $95,000 for individuals and $170,000 for married couples. The IRS has posted a revised version of Form 5405, First-Time Homebuyer Credit, on IRS.gov. The revised form incorporates provisions from the American Recovery and Reinvestment Act of 2009, and the form’s instructions includes additional information on who can and cannot claim the credit, income limitations and under what circumstances the credit must be repaid.

(By the way, the IRS defines your primary residence as your “main home.” You may purchase the following types of property and still qualify for the tax credit: house, cooperative housing unit, condominium, houseboat, house trailer, or other type of housing unit.)

As for the $15,000 tax credit legislation proposed by Sen. Johnny Isakson (R-GA), I don’t think it will pass unless the economy takes a sudden turn for the worse, or it becomes clear that the real estate market isn’t finding its legs.

I think we’d have to see real estate sales drop off completely, or watch the official unemployment rate go to 11 or 12 percent nationally before the federal government would push through another home buyer tax credit.

More likely, we’ll see the existing first-time home buyer tax credit deadline extended if home sales don’t pick up by the end of the year. Right now, you have to close on your first home before December 1, 2009. We could see that deadline extended through sometime next year. We might also see the home buyer tax credit expanded to other home buyers, rather than be limited to first-time buyers.

The bottom line is if you’re waiting to buy a house because you think next year you’ll get an even better tax credit, you might miss out altogether.

READ MORE:

For additional discussion on this issue read the following stories:

$8,000 Tax Credit Downpayment Relief: The Treasury Department Giveth and Taketh Away

Completion Date is Key to $8,000 first time home buyer tax credit

Repaying The $8,000 First-Time Home Buyer Tax Credit

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