How does the $8,000 tax credit for first-time home buyers work?

by Kirk Mason (mason@wsbt.com)

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By WSBT News1

Story Created: May 11, 2009 at 12:31 PM EST

Story Updated: May 11, 2009 at 2:38 PM EST

A new program from the federal government is designed to help jump-start the struggling housing market.

Several viewers have asked a Good Question: "How does the $8,000 tax credit for first-time home buyers work?"

WSBT's Kirk Mason looked into it.

Did you know you don't have to be a first-time home buyer to qualify for what many are calling the first-time home buyer tax credit? If you have not owned a home in the last three years you can also get in on the program.

The tax credit is equal to 10 percent of the home's purchase price, up to $8,000. The income limit for single taxpayers must be no more than $75,000. For married taxpayers it is $150,000.

The home must be bought from between January 1 and December 1 of this year.

The most interesting part to home buyers will be the actual payout of the money. It comes in the form of your tax return. For example, if you were to get a $1,000 return check next year, an $8,000 tax credit would make that check worth $9,000.

But the refund is based on how much income tax you pay. In other words, you can't get an $8,000 tax credit if you didn't pay at least $8,000 in income tax.

Susan Cox, a branch manager for local Realtor Cressy and Everett, thinks this program is not just a big incentive for home buyers. She says those having trouble selling homes should now have a better chance to get them off the market.

And Cox says if you have already bought a home this year, but would like the tax credit early, you can talk to a tax professional about getting the money before next year's tax return.

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