How does the $8,000 first time home buyer tax credit work?
First time home buyers or those who have not owned a home in the three-years immediately preceding their home purchase may be eligible for an $8,000 tax credit. The purchaser must be a U.S. taxpayer, the home must be the taxpayer’s principle residence, the home must be located in the U.S., and the purchase date must be between January 1, 2009 and December 1, 2009. Some income and other restrictions also apply. Unlike the tax credit of $7,500 in 2008, this tax credit does not have to be repaid unless the home ceases to become the principle residence of the taxpayer within 36 months of the purchase date. Buyers who qualify should complete IRS Form 5405 when filing their annual taxes. This is a tax credit rather than a tax deduction. This means it will reduce dollar for dollar the taxes owed or increase dollar for dollar the refund received. For more information, go to irs.gov.
