With tax time upon us once again, it is important to point out a great tax credit that is available for first time homebuyers this year. This was enacted as part of the Housing and Economic Recovery Act of 2008 and is designed to help lessen the financial impact of buying your first home.
If you are first time homebuyer and purchase a home between April 8, 2008 and July 1, 2009, you may be eligible for a tax credit of up to $7500. It is a tax credit, not a deduction, so it will be paid out to eligible tax payers even if the credit is more than the tax that they owe.
The credit essentially is like an interest-free loan. In the first year, you receive the credit on your tax return, and then you end up repaying the credit over a 15-year period via your tax return.
I am not going to pretend to be an IRS tax expert, so I’ll refer you directly to this page on the IRS website which talks about the credit in more detail. If you have purchased a home after April 8, 2008 or plan to purchase before July 1, 2009, please consult with you tax advisor and make sure to take advantage of this credit.
UPDATE: Congress is proposing to remove the “pay back” provisions of this tax credit as part of the new economic stimulus package. This will make the credit even more appealing to first-time homebuyers. Check out this article in the Seattle Times for more details.