Story last updated at 3/11/2009 - 10:58 am
First-time home buyers who have closed their deals since Jan. 1 can get a jump-start on a tax credit worth up to $8,000 by claiming it on their 2008 income tax returns, the Internal Revenue Service announced recently.
The tax credit is part of the $787 billion stimulus package President Barack Obama signed Feb. 17. The law defines a first-time buyer as someone who has not owned a home in at least three years before the date of purchase.
A tax credit provides a dollar-for-dollar reduction in the amount owed in income taxes. After reducing what's owed, the remaining amount of the credit goes to the taxpayer in the form of a refund.
The tax credit is available for first-time buyers who purchase between Jan. 1 and Dec. 1. They can either claim the credit on this year's return due April 15, or file for the credit in 2009.
"For first-time home buyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit," IRS Commissioner Doug Shulman said in a statement.
Buyers can claim a maximum credit of $8,000, or up to $4,000 for married individuals filing separately, according to the IRS. The credit phases out for married couples with adjusted gross income of $150,000 and for individual taxpayers with income above $75,000.
A key benefit of the tax credit is buyers don't have to repay any of it, provided they use the home as the primary residence for at least three years.
That provision is more generous than the tax credit for first-time home buyers who bought between April 9, 2008 and Dec. 31, 2008. Those buyers can claim up to $7,500 for married couples and up to $3,750 for individuals. However, they must repay the IRS over a 15-year period starting in 2010, which essentially makes the tax credit more like a no-interest loan.