Housing and Economic Recovery Act of 2008

Good news for the first time home buyer.

H.R. 3221, The Housing and Economic Recovery Act of 2008 (July 30, 2008) authorizes a $7,500 tax credit for qualified first-time home buyers purchasing homes on or after April 9, 2008 and before July 1, 2009. A first time home buyer is defined as, "a buyer who has not owned a principal residence during the three-year period prior to the home purchase."

"The tax credit is the best stimulative measure, It will increase housing demand, get home buyers back into the marketplace and fight falling home prices, which threaten the economy as a whole.” NAHB President Sandy Dunn, a home builder from Point Pleasant, W.Va.

In order to receive the tax credit, the first time home buyer must close on the home between April 9, 2008 and July 1, 2009, and you must also meet income requirements of $95,000 (single) or $170,000 (married).

Of course there are things about a tax credit that buyers need to be aware of and consult a tax professional. This is a tax credit, meaning that you must repay the government either over the next 15 years (no interest charged), or when you sell the home, if there were sufficient capital gains from the sale.

Example: Home buyers will be required to repay the credit to the government, without interest, over 15 years or when they sell the house, if there is sufficient capital gain from the sale. For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. The home owner does not have to begin making repayments on the credit until two years after the credit is claimed. So if the tax credit is claimed on the 2008 tax return, a $500 payment is not due until the 2010 tax return is filed. If the home owner sold the home, then the remaining credit amount would be due from the profit on the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven. National Association of Home Builders (NAHB).

For more information about the tax credit, please visit the Web site of the National Association of Home Builders, www.federalhousingtaxcredit.com.