On July 30, 2008, The Housing and Economic Recovery Act of 2008 was passed, which includes a new, temporary tax credit as an incentive for first time home buyers. With this bill, first time homebuyers may qualify for up to $7500 in a tax credit for the purchase of a principal residence.

The tax credit is equal to 10% of the purchase price of the home up to $6500. You must purchase your home between April 9, 2008 - July 1, 2009 to qualify.

This tax credit does need to be repaid, however to repay the credit, it will be without interest, over 15 years or when you sell your home. The yearly amount to repay for $7500 would be $500. The homeowners does not need to begin repayments on the credit until 2 years after the credit is claimed. If you sell your home and there was insufficient profit, then the remaining credit payback would be forgiven.

Before you decide to use the homebuyer tax credit, please consult with a tax professional.