Homebuyer Tax Relief, Government Takes Risk

April 9th, 2008 through June 30th, 2009 should be important dates to potential homebuyers. Recently a bill was enacted that makes first time homebuyers, or anyone who has not bought a house in the past three years, eligible for a tax credit of $7,500 against their federal taxes. It is estimated that hundreds of thousands of homebuyers will benefit from this program.

It may be an understatement to say that home sales are in a slump but the government is offering this credit in order to boost housing sales. It's a tax credit so if you owe the IRS any money it goes toward that first. For instance, say a homeowner owes $3,000. If they are eligible their credit of $7,500 will go toward that and they'll collect the difference of $4,500. Pretty sweet, huh?

Some rules:

If your adjusted gross income is more than $150,000, the $7,500 tax relief begins to dwindle.

Don't even think about claiming the credit if you don't plan to use the house as your primary residence.

Beginning in the second tax year of receiving the $7,500 credit tax payers must start paying it back, $500 dollars at a time and which will ultimately take 15 years. However, you pay no interest over the 15 years.

If the home is sold before the 15 years is up and no money is made from the deal then the government swallows the remainder of the credit. It doesn't have to be paid back!

To qualify, a homebuyer must request the credit on their 2008 or 2009 tax return.