Last year, Congress offered a tax credit for "first-time" homebuyers. Actually, this credit was offered to anyone buying a home who has not owned a home and used it as a principal residence in the prior three years. This year’s American Recovery and Reinvestment Act extends the tax break, with some key changes.
2008 law: This provision now applies to qualified home purchases that closed from April 9, 2008, through December 31, 2008. The credit is 10% of the purchase price, up to $7,500. The tax savings has to be paid back over 15 years or when the house is sold, if that comes sooner.
2009 law: For qualified home purchases from January 1, 2009, through November 30, 2009, the cap is raised to $8,000. No repayment is required for buyers who live in the house they buy for at least 36 months.
Under both laws, you can claim the credit on either your 2008 or 2009 tax return. If the credit you claim is more than the tax you owe, the IRS will send you a check for the difference.
The same income limits apply to the 2008 and 2009 laws. The full credit is available to single taxpayers with income up to $75,000 and partial credits up to $95,000 of income. For married couples filing joint tax returns, those income limits are $150,000 (for the full credit) and $170,000 (for partial credits).
