First Time Home Buyer Tax Credit: How does it work?

This post is a part of a series of posts that gives the details on the Federal Governments tax credit incentive to First Time Home Buyers. The six parts answer the following questions:

• Am I Eligible?


• How does it work?


• How big is the tax credit, as a single person?


• How big is the tax credit, as a married couple?


• What about repayment?


• Are there other conditions I should know about?

If your questions are not answered by these posts, feel free to contact me directly!

Question 2: How Does It Work?

Like all tax credits, it will DIRECTLY REDUCE THE TOTAL AMOUNT OF TAXES YOU OWE. When you file your taxes, for the year you purchased your home (2008 or 2009), you will be able to subtractthe amount of the credit from your Federal income tax liability, increasing the size of your refund orreducing the amount you owe.

For example, you file your ‘normal’ tax return and find that you owe $2,000 in taxes. With this credit, your tax liability could be lowered by $8,000—which means, youinstead get a $6,000 tax ReFUND check from IRS.

NEXT: How big is the tax credit, as a single person?