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The $8,000 first-time home buyer tax credit is bringing the dream of homeownership within reach for many.

As part of its plan to stimulate the U.S. housing market, Congress has passed legislation that grants a tax credit of up to $8,000 to first-time home buyers. Here is more information about how the 2009 First-Time Home Buyer Tax Credit can help prospective home buyers become part of the American dream.

Who Qualifies?

First-time buyers who purchase homes between January 1, 2009 and December 1, 2009. To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

Which Properties Are Eligible?

The 2009 First-Time Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos and townhouses.

How Much Will the Credit Be?

The maximum allowable credit for home buyers is $8,000. Each home buyer’s tax credit is determined by two factors:

The price of the home – the credit is equal to 10% of the purchase price of the home, up to $8,000.

The buyer’s income – single buyers with incomes up to $75,000 and married couples with incomes up to $150,000 – may receive the maximum tax credit.

The credit decreases for buyers who earn between $75,000 and $95,000 for single buyers and between $150,000 and $170,000 for home buyers filing jointly.

Will the Tax Credit Need to Be Repaid?

No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during the three-year period, the credit will be recouped on the sale.

Has the tax credit been working to stimulate the housing market?

Yes. In many markets the number of sales is up substantially over 2008. Each sale to a first-time buyer often leads to many more sales. The seller who sells a home for $200,000 to a first-time buyer will often “move up” and purchase a home for $300,000. The seller of the $300,000 home is now free to purchase a $400,000 home etc. I was recently at a closing that was number 3 in a chain of 5 sales that started with the first-time home buyer who was taking advantage of the tax credit.

Many professionals get paid with each sale including realtors, attorneys, appraisers, home inspectors, plumbers, painters, electricians etc. In addition, both the State and Town receive conveyance tax revenue with each transaction. Hopefully, Congress will elect to extend the tax credit until sometime in 2010.