• The federal government has provided a tax credit to first-time home buyers.home sweet home image by David Dorner from Fotolia.com
  
  In an effort to increase home sales, the federal government enacted the Worker, Home ownership and Business Assistance Act of 2009. Part of the legislation provided a tax credit to first-time home buyers. Repeat home buyers were also entitled to a smaller tax credit. Some common questions may arise from this legislation. In addition to the home ownership tax credit, a low income tax credit exists for the developer.
  
  

Eligibility

• According to the Internal Revenue Service's official website, eligibility for the first time buyer housing credit is only available to the buyer who has purchased a primary residence between January 1, 2009 and April 30, 2010. This buyer is defined as anyone who has not owned a principal residence for three years prior to purchasing a home.
  
  Move-up or repeat home buyers must have owned or lived in a previous residence for five consecutive years out of the last eight years. Income for both these types of buyers cannot exceed $125,000 a year for the single person and $225,000 for married couples.
  
  

Tax Credits

• For first-time home buyers, the tax credit is for 10 percent of the purchase price up to $8,000, according to the Federal Housing Tax Credit's website. For repeat home buyers, the tax credit is for 10 percent of the purchase price up to $6,500. For both first-time and repeat home buyers, the credit applies only if the home is purchased at a price of $800,000 or less.
  
  

Claiming the Tax Credit

• In order to claim the tax credit, a home owner must file a federal tax return. She'll also need to fill out IRS Form 5405, which will help determine how much she is entitled as a tax credit. Once the return is filled out, a credit will be added to the return. No other paperwork is needed to claim the housing tax credit.
  
  

Tax Credit versus Tax Deduction

• A tax credit is different from that of a tax deduction. According to the Federal Housing Tax Credit website, a tax deduction subtracts the amount of taxable income reported to the IRS. On the other hand, a tax credit is like receiving cash from the IRS. For example, if $8,000 is owed in taxes, a equal credit will wipe this debt away. Therefore, a tax credit is actually worth a lot more than a tax deduction.
  
  

Low Income Housing Tax Credit

• The Low Income Housing Tax Credit differs from the homeowner's tax credit. The Low Income Housing Tax Credit provides a federal subsidy provided to developers. The credits are used for the development of affordable rental properties, particularly for low-income households. According to the U.S. Department of Housing and Urban Development, developers who qualify for a federal tax credit sell the credits to investors. This, in turn, makes the debt owed on a project much less for the developer. Finally, with less debt, developers can be creative and offer a lower, more affordable price.