$7,500 First-Time Homebuyer Tax Credit

Are there any first-time homebuyers out there? In a nutshell, the tax credit is available to qualifying first-time homebuyers who purchase a principle residence between April 9, 2008 and July 1, 2009.

Buyers don't have to apply for the credit. They simply claim it on their next federal tax return or, if they want to see savings earlier, adjust their tax withholdings through their employer now in anticipation of the future credit. The credit is not available to individuals earning more than $95,000 or married couples earning more than $170,000.

The tax credit not only reduces a homeowner's tax liability but because it is a refundable credit, homeowners will get a refund check if their liability is lower than the $7,500 credit. Much like an interest-free loan, however, the tax credit must be repaid by the homebuyer over the course of 15 years. Payments begin two years after the credit is claimed and, for someone qualifying for the full credit, will equal $500 annually. If the home is sold before the credit is repaid the seller must pay the outstanding balance.