First Time Home Buyer $7,500 Tax Credit

On July 26, 2008 Congress passed the Housing and Economic Recovery Act of 2008. A few days later President Bush signed it into law. One provision of this law includes a $7,500 tax "credit" to first time home buyers. This credit is good on homes purchased between April 9, 2008 and June 1, 2009.

$7,500

A few details about the law:

• The law defines "first time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase.


• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.


• The tax credit works like an interest-free loan and must be repaid over a 15-year term or when they sell the house, if there is sufficient capital gain from the sale.


• The credit is refundable so it can be claimed even if the taxpayer has little or no federal income tax liability to offset.

After examining the details of this "credit", I feel that it's really nothing more than an interest free loan of $7,500 on a 15 year term. The only way you wouldn't be paying back the full $7,500 is if you sold the house within the 15 year term and did not have enough capital gains on it. At this point, the loan is forgiven.

For additional details, visit the Federal Housing Tax Credit web site

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