The New and Improved Homebuyer Tax Credit

The new American Recovery and Reinvestment Act provides an $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009.

Who is eligible? First time home buyers or anyone who has not owned a home in the last 3 years with income of $75,000 or less if filing as a single or $150,000 for married couples filing jointly.

What type of property qualifies? Any home purchased as a principal residence between January 1, 2009 and December 1, 2009.

How does it work? The $8,000 tax credit would be claimed on a tax return to reduce the purchaser's income tax liability. If any credit amount is unused, then the unused amount would be refunded as a check to the purchaser.

How is this credit different than the one offered in 2008? First of all, it is $8000, not $7500. Secondly, and more importantly, the credit is a "true" credit, with no requirement to repay the government back as long as you maintain the property as a principal residence during the first three years.

"What's in it for me?" Well, it's pretty obvious if you are someone classified as a first-time home buyer. The government has just given you an $8,000 carrot to buy a home now. Tack that onto the already low interest rates, and there has never been a better time to buy house.

And for those of you who are not first-time homebuyers? Well, hopefully, we will begin to see people jumping off the proverbial fence and into the housing market. In essence, we would have a "domino effect" with housing inventory beginning to move again which can only help all home sellers and buyers.

Have more questions? Read all about it here.