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Did you know that the federal government has made home ownership more enticing for first-time buyers?

For the remainder of this year and the first half of 2009, the government will give a tax credit of up to $7,500 to eligible couples. The tax credit is worth 10% of the purchase price of the home. The tax credit amounts to an interest-free 15-year loan for first-time homebuyers.

In the words of Kieren Quinn, Chairman of the Mortgage Bankers Association: “This is the most important piece of housing-related legislation that we have seen in more than a generation.” The new legislation has helped put many young couples in Allen Edwin Homes.

Because the tax credit is for people who purchase their primary residence, individuals may qualify for the tax credit even if they own a vacation home or rental property as long as those properties were not their primary residence for at least three years preceding the purchase of their new home.

The credit is phased out for individuals with modified adjusted gross income between $75,000 and $95,000. For married couples filing a joint return, the phase out range is $150,000 to $170,000.

The credit is fully refundable, meaning taxpayers will be able to obtain an additional federal tax refund of up to $7,500 even if they have no other tax liabilities. Taxpayers will be able to claim the credit on their 2008 tax return for homes purchased in 2008. For homes purchased in 2009, the IRS will allow the purchasers to file an amended 2008 return to claim the credit.

Then the credit will be repaid as an additional tax on tax returns for the next 15 years. For the maximum $7,500 credit, this works out to annual repayments of $500 per year.