What the Housing and Economic Recovery Act of 2008 Means for You

The time has never been better to buy your first home.  The Housing and Economic Recovery Act of 2008 grants first-time homebuyers (or homebuyers who have not owned a principal residence during the three-year period prior to their home purchase) up to a $7,500 tax credit if the purchase is completed between April 9, 2008 and July 1, 2009. 

There are certain income requirements. But even if you are over the modified adjusted gross income level of $95,000 (single) or $170,000 (married), you may be able to receive partial tax credits.  Just claim the tax credit on your federal income tax return.  If you want quicker access to the funds, your are permitted to reduce your income tax withholding by submitting a new W-4 with your employer or adjusting your quarterly estimated tax payments.

Keep in mind, though, this is a tax credit not a deduction, meaning you must repay the government either over the next 15 years (no interest charged), or when you sell the home.  For example, if you claim a $7,500 credit, you would repay the credit at $500 per year beginning two years after receiving the credit.  So if you claim the credit on your 2008 tax return, your first $500 payment is due when you file your 2010 tax return.  If you sell your home, the remaining credit will be due from the home sale profit.  If there's insufficient profit, the remaining credit will be forgiven.

So, first-time homebuyers, what are you waiting for?