Qualifying taxpayers who buy a home this year before Dec. 1 can get up to $8,000, or $4,000 for married filing separately.

“For first-time homebuyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit,” said IRS Commissioner Doug Shulman. “This important change gives qualifying homebuyers cash they do not have to pay back.”

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. The instructions to the revised Form 5405 provide additional information on who can and cannot claim the credit, income limitations and repayment of the credit.

This year, qualifying taxpayers who buy a home before Dec. 1, 2009, can claim the credit on either their 2008 or 2009 tax returns. They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. They can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.

For purposes of the credit, you are considered to be a first-time homebuyer if you, and your spouse if you are married, did not own any other main home during the three-year period ending on the date of purchase.

The IRS also alerted taxpayers that the new law does not affect people who purchased a home after April 8, 2008, and on or before Dec. 31, 2008. For these taxpayers who are claiming the credit on their 2008 tax returns, the maximum credit remains 10 percent of the purchase price, up to $7,500, or $3,750 for married individuals filing separately. In addition, the credit for these 2008 purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year.

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For all other filing statuses, your interest exclusion is phased out if your MAGI is between $67,100 and $82,100. You cannot take a deduction if your MAGI is $82,100 or more.

Income limits for credit reduction increased. For 2008, the amount of your Hope or lifetime learning credit is phased out (gradually reduced) if your modified adjusted gross income (MAGI) is between $48,000 and $58,000 ($96,000 and $116,000 if you file a joint return). You cannot claim an education credit if your MAGI is $58,000 or more ($116,000 or more if you file a joint return).

Hope credit. Beginning in 2008, the amount of the Hope credit (per eligible student) is the sum of:

100% of the first $1,200 ($2400 if a Midwestern disaster area student). of qualified education expenses you paid for the eligible student, and
50% of the next $1,200 ($2400 if a Midwestern disaster area student). of qualified education expenses you paid for that student.

The maximum amount of Hope credit you can claim in 2008 is $1,800 ($3600 if a Midwestern disaster area student) per student

For all other filing statuses, your student loan interest deduction is phased out if MAGI is between $55,000 and $70,000. You cannot take a deduction if your MAGI is $70,000 or more.

For more information, see chapter 4 in Publication 970, Tax Benefits for Education

See Form 8917 and chapter 6 of Publication 970, Tax Benefits for Education, for more information about the tuition and fees deduction.

Form 8917 – Tuition and Fees Deduction

Publication 970 – Tax Benefits for Education

• A child who is age 18 at the end of the year and whose earned income is not more than half of the child’s support, and
• A student who is under age 24 at the end of the year and whose earned income is not more than half of the child’s support.

Form 8615, Tax for Children Under Age 18 With Investment Income of More Than $1,700 is used to figure the child’s tax.

Increase in age of children whose investment income is taxed at parent’s rate. A student is a child who during any part of 5 calendar months of the year was enrolled as a full-time student at a school, or took a full-time, on-farm training course given by a school or a state, county, or local government agency. A school includes a technical, trade, or mechanical school. It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet.

The amount of taxable investment income these children can have without it being subject to tax at the parent’s rate has increased to $1,800 for 2008. For 2007, the amount was $1,700.

These amounts are phased out if your modified adjusted gross income (MAGI) is between $174,730 and $214,730.

You cannot claim the credit or exclusion if your MAGI is $214,730 or more.

Amount of credit increased

The maximum amount of the credit has increased. The most you can get is:

• $2,917 if you have one qualifying child,
• $4,824 if you have more than one qualifying child, or
• $438 if you do not have a qualifying child.

Earned income amount increased

The maximum amount of income you can earn and still get the credit has increased for 2008. You may be able to take the credit if:

• You have more than one qualifying child and you earn less than $38,646 ($41,646 if married filing jointly),
• You have one qualifying child and you earn less than $33,995 ($36,995 if married filing jointly), or
• You do not have a qualifying child and you earn less than $12,880 ($15,880 if married filing jointly).

The maximum amount of AGI you can have and still get the credit also has increased. You may be able to take the credit if your AGI is less than the amount in the above list that applies to you.

Investment income amount increased

The maximum amount of investment income you can have and still get the credit has increased to $2,950 for 2008.

Advance payment of the credit

If you get advance payments of the credit from your employer with your pay, the total advance payments you get during 2008 can be as much as $1,750.

Nontaxable combat pay election

You can elect to include your nontaxable combat pay in earned income when you figure your earned income credit for 2008. This election was due to expire at the end of 2007 but has been extended to years after 2007.

Download 2008 EIC Table – 2008 EIC Table