In a previous article I shared how the “Housing and Economic Act of 2008” provided first-time home buyers up to a $7,500 tax credit for homes purchased after April 8, 2008. The credit was 10% (ten percent) of the price of any home purchased in the United States, with a maximum credit of $7,500 for a single taxpayer or married couple filing jointly. The 2008 “credit” acted as a no interest loan from the federal government, to be paid back in equal 15 year installments with the annual tax returns.

For first time home purchases beginning January 1, 2009 up until December 1, 2009, the first time home buyer credit has been modified in favor of the taxpayer. The maximum credit is increased to $8,000, and does not have to be paid back, providing the recipient continues to use the home as his/her primary residence for at least 36 months.

To qualify for the full credit, ones modified adjusted gross income (MAGI) should not exceed $75,000 for single taxpayers and $150,000 for married couples filing jointly.

To obtain the first-time homebuyers credit, the new homeowner files Form 5405 with their return in the year of the purchase (2008 or 2009). Additional instructions for non-married co-owners who would like to receive the credit are available via IRS Notice 2009-12.

For 2009, IRS Form 5405 now offers the first time buyer a one-time TAX CREDIT, not an income tax deduction or government loan.