What Is the Home Loan Tax Credit?

Buying a home can earn you tax credit

The government has introduced a program designed to stimulate the United States' slumping housing markets by offering tax credits to prospective buyers. These represent a significant savings for the savvy buyer.

Types

There are two tax credits available, according to federalhousingtaxcredit.com: an $8000 credit for first-time home buyers and a $6500 tax credit for repeat home buyers.

First-Time Home Buyers

The first-time buyer tax credit has been extended to May 1, 2010. For the 2009 and 2010 credits you do not have to pay back the tax credit provided you live in the home as your principal residence for at least three years, according to the National Association of Home Builders.

Repeat Home Buyers

If you cannot qualify for the first-time buyer tax credit, the government has provided a second option. You must have lived in another home for five of the last eight years to qualify for this credit, which will cover up to 10% of your new home's purchase price or $6500, whichever is the larger amount. This credit has also been extended to May 1, 2010.

Benefits

This is a powerful tool for home buyers to use when looking for a new home. The tax credits both offer a significant savings with no need to pay back the amount given.

Considerations

Remember that buying a home is a huge undertaking. While the tax credits are very useful when buying a home, using them as the main reason for buying a new home can be dangerous financially. Only buy a new home if your finances are truly ready.

References

• Home Buyer Tax Credits