Real estate law made simple: Making sense of the new homebuyer tax credit

Understanding the programs available to new buyers and returning buyers – all of which expire for contracts signed after April 30, 2010 – is imperative for anyone considering buying because the financial benefits are significant.

There are two groups that can benefit from the current incentive program:  New home buyers – those who have not owned a principal residence in the last three years – are entitled to a credit up to $8,000.  Unlike the 2008 stimulus, this program is a tax credit that does not need to be repaid unless the taxpayer sells the replacement property within 3 years of purchase.  As long as you keep the new property for 3 years as your principal residence, the money is yours to keep.  And this is not a deduction against income, this is a dollar for dollar credit.  So if you’re tax return before the credit is $1,000, and you are entitled to the full credit, you will get a check from the IRS for $9,000.  Now that’s real.