As part of its major housing legislation (H.R. 3221), Congress has created a tax credit to provide an incentive for first-time homebuyers. The $7500 credit will be available for the purchase of a principal residence on or after April 9, 2008 and before July 1, 2009. Any single-family residence (including condos, co-ops) that will be used as a principal residence is eligible.  There is an income limit, with the full amount of credit available for individuals with adjusted gross income of no more than $75,000 and $150,000 on a joint return.  A first-time homebuyer is defined as a buyer who has not owned a home during the past three years.   The tax credit is refundable.  A refundable credit means that if you pay less than $7,500 in federal income taxes, then the government will write you a check for the difference.  For example, if you owe $5,000 in federal income taxes, you would pay nothing to the IRS and receive a $2,500 payment from the government.  If you are due to receive a $1,000 tax refund from the government, your refund would increase to $8,500 ($1,000 plus $7,500 from the homebuyer tax credit).  The tax credit essentially serves as an interest-free loan to be repaid over 15 years.

For more details on the tax credit, click on the links below.

Federal Housing Tax Credit
Homebuyer Tax Credit
Housing and Economic Recovery Act of 2008
Tax Credit (PDF)

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