‘‘(i) the excess (if any) of— 
‘‘(I) the taxpayer’s modified ad-
justed gross income for such taxable 
year, over 
‘‘(II) $125,000 ($225,000 in the 
case of a joint return), bears to 
‘‘(ii) $20,000. 
‘‘(B) MODIFIED
ADJUSTED
GROSS
IN-
COME.—For purposes of subparagraph (A), the 
term ‘modified adjusted gross income’ means 
the adjusted gross income of the taxpayer for 
the taxable year increased by any amount ex-
cluded from gross income under section 911, 
931, or 933. 
‘‘(3) 
LIMITATION
BASED
ON
PURCHASE 
PRICE.—No credit shall be allowed under subsection 
(a) for the purchase of any residence if the purchase 
price of such residence exceeds $800,000. 
‘‘(4) AGE LIMITATION.—No credit shall be al-
lowed under subsection (a) with respect to the pur-
chase of any residence unless the taxpayer has at-
tained age 18 as of the date of such purchase. In 
the case of any taxpayer who is married (within the 
meaning of section 7703), the taxpayer shall be 
treated as meeting the age requirement of the pre-
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ceding sentence if the taxpayer or the taxpayer’s 
spouse meets such age requirement. 
‘‘(c) DEFINITIONS.—For purposes of this section— 
‘‘(1) 
FIRST-TIME
HOMEBUYER.—The 
term 
‘first-time homebuyer’ means any individual if such 
individual (and if married, such individual’s spouse) 
had no present ownership interest in a principal resi-
dence during the 3-year period ending on the date 
of the purchase of the principal residence to which 
this section applies. 
‘‘(2) PRINCIPAL RESIDENCE.—The term ‘prin-
cipal residence’ has the same meaning as when used 
in section 121. 
‘‘(3) 
ECONOMICALLY
DISTRESSED
COMMU-
NITY.— 
‘‘(A) IN
GENERAL.—The term ‘economi-
cally distressed community’ means any area 
identified as an economically distressed commu-
nity for purposes of this section by the Sec-
retary of Housing and Urban Development. 
‘‘(B) FACTORS
TO
BE
TAKEN
INTO
AC-
COUNT.—For purposes of identifying areas as 
economically distressed communities for pur-
poses of this section, the Secretary of Housing 
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and Urban Development shall take into account 
the following: 
‘‘(i) Percent of the population in such 
area which has attained age 25 and is 
without a high school degree. 
‘‘(ii) Percent of habitable housing in 
such area that is unoccupied, excluding 
properties that are for seasonal, rec-
reational, or occasional use. 
‘‘(iii) Percent of the population in 
such area which has attained age 16 and 
is not currently employed. 
‘‘(iv) Percent of population in such 
area which is living under the poverty line. 
‘‘(v) Ratio of such area’s median in-
come to the median income of the State in 
which such area is located. 
‘‘(vi) Percent change in the number of 
employed individuals in such area in 2013 
compared to 2010. 
‘‘(vii) Percent change in the number 
of business establishments in such areas in 
2013 compared to 2010. 
‘‘(viii) Such other factors as such Sec-
retary determines appropriate. 
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‘‘(4) PURCHASE.— 
‘‘(A) IN GENERAL.—The term ‘purchase’ 
means any acquisition, but only if— 
‘‘(i) the property is not acquired from 
a person related to the person acquiring 
such property (or, if married, such individ-
ual’s spouse), and 
‘‘(ii) the basis of the property in the 
hands of the person acquiring such prop-
erty is not determined— 
‘‘(I) in whole or in part by ref-
erence to the adjusted basis of such 
property in the hands of the person 
from whom acquired, or 
‘‘(II) under section 1014(a) (re-
lating to property acquired from a de-
cedent). 
‘‘(B) CONSTRUCTION.—A residence which 
is constructed by the taxpayer shall be treated 
as purchased by the taxpayer on the date the 
taxpayer first occupies such residence. 
‘‘(5) PURCHASE
PRICE.—The term ‘purchase 
price’ means the adjusted basis of the principal resi-
dence on the date such residence is purchased. 
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‘‘(6) RELATED
PERSONS.—A person shall be 
treated as related to another person if the relation-
ship between such persons would result in the dis-
allowance of losses under section 267 or 707(b) (but, 
in applying section 267(b) and (c) for purposes of 
this section, paragraph (4) of section 267(c) shall be 
treated as providing that the family of an individual 
shall include only his spouse, ancestors, and lineal 
descendants). 
‘‘(7) EXCEPTION
FOR
LONG-TIME
RESIDENTS 
OF SAME PRINCIPAL RESIDENCE.—In the case of an 
individual (and, if married, such individual’s spouse) 
who has owned and used the same residence as such 
individual’s principal residence for any 5-consecu-
tive-year period during the 8-year period ending on 
the date of the purchase of a subsequent principal 
residence, such individual shall be treated as a first- 
time homebuyer for purposes of this section with re-
spect to the purchase of such subsequent residence. 
‘‘(d) EXCEPTIONS.—No credit under subsection (a) 
shall be allowed to any taxpayer for any taxable year with 
respect to the purchase of a residence if— 
‘‘(1) the taxpayer is a nonresident alien, 
‘‘(2) the taxpayer disposes of such residence (or 
such residence ceases to be the principal residence of 
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the taxpayer (and, if married, the taxpayer’s 
spouse)) before the close of such taxable year, 
‘‘(3) a deduction under section 151 with respect 
to such taxpayer is allowable to another taxpayer for 
such taxable year, or 
‘‘(4) the taxpayer fails to attach to the return 
of tax for such taxable year a properly executed copy 
of the settlement statement used to complete such 
purchase. 
‘‘(e) REPORTING.—If the Secretary requires informa-
tion reporting under section 6045 by a person described 
in subsection (e)(2) thereof to verify the eligibility of tax-
payers for the credit allowable by this section, the excep-
tion provided by section 6045(e) shall not apply. 
‘‘(f) RECAPTURE OF CREDIT.— 
‘‘(1) IN GENERAL.—If a taxpayer disposes of 
the principal residence with respect to which a credit 
was allowed under subsection (a) (or such residence 
ceases to be the principal residence of the taxpayer 
(and, if married, the taxpayer’s spouse)) before the 
end of the 5-year period beginning on the date of the 
purchase of such residence by the taxpayer, the tax 
imposed by this chapter for the taxable year of such 
disposition or cessation shall be increased by the 
amount of the credit so allowed. 
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