If you don’t know about the federal tax credit for 1st-time home buyers, now may be the time to look into it. The program offered a credit of up to $7,500 to purchasers who had never bought a house or hadn't owned one during the previous three years. To qualify, taxpayers would need to close on a house between April 8, 2008, and this coming July 1. However relatively few people were attracted to this plan because unlike almost all other federal tax credits, this one had to be repaid in full over a 15-year period. In effect, the $7,500 was more like an interest-free installment loan from the government than a straightforward dollar-for-dollar reduction on buyers' tax bills.
The House and Senate still need to negotiate the final details on a revised tax credit, as well as the rest of the stimulus plan, but there’s a good chance that if you bought in 2008 and wanted to take ad advantage of the credit or will be a new purchaser in 2009, you will be relieved of the repayment requirement. Check out these two recent IRS advisories on the credit, plus a new Form 5405 for taxpayers interested in claiming the $7,500 benefit, either for 2008 or 2009. Download a copy of the form at http://www.irs.gov in the publications and forms section.