Tax credit for new homebuyers...

The Housing and Economic Recovery Act of 2008 was a part of recent legislation passed with the intention of easing the economic woes of Americans. Part of that legislation is a tax credit for first-time homebuyers. Please consult with a tax professional prior to applying for this credit.

Highlights of the tax credit:

• Amount of Credit: 10% of home, not to exceed $7500


• First-time homebuyer only: Purchaser and purchaser's spouse may not have owned a principal residence within the past 3 years.


• Effective date: purchases on or after April 9th, 2008


• When to apply?: Available when filing 2008 or 2009 taxes


• Income Limit: Full amount available for individuals with AGI of no more than $75k or $150k for a joint return.


• Refundable: Yes. This credit reduces income tax liability for the year of purchase. Claimed on tax return for that tax year.

THE CATCH!: The credit must be paid back at the rate of $500 per year. If the house sells at a loss before the balance is paid off, then the balance is forgiven. If the house sells for a profit, the balance is paid off through those proceeds. In short, this acts as a 0% interest loan from the government.