Congress recently enacted legislation providing a tax credit worth up to $8,000 for first-time homebuyers. A tax credit is a dollar-for-dollar reduction in taxes, so if a buyer gets the $8,000 perk and the amount they owe in taxes to the IRS happens to equal $8,000 they do not have to pay the IRS a penny.

That is especially handy during these hard economic times, and helps to offset the higher cash down payment requirements that banks and other lenders have recently instituted in the wake of their own financial meltdown. The National Association of Realtors (NAR) estimates that the $8,000 credit will, in fact, inspire sales of approximately 300,000 more houses to help boost the real estate market and stimulate the overall economy.

But time is of the essence for buyers who want to take advantage of this unique and valuable opportunity. Unless changes are made to the current law to extend it – and none are being seriously discussed at this time – only those homes purchased on or after January 1, 2009 and before December 1, 2009 are going to be eligible.

Lots of people who have owned homes in the past immediately assume that they are disqualified, but that is not necessarily true because the official criteria for a “first time” borrower includes lots of people who have owned a house sometime during their life. Before registering disappointment because they consider themselves ineligible for the perk, buyers should understand that the government’s definition of a “first time” buyer is someone who has not owned their primary residence within the past three years. Applying the broader definition of a first-time home buyer, those who were homeowners as recently as 2005 but sold their houses and have been renting since then are probably still considered to be first-timers.

Buyers must also live in the house they purchase with the tax credit for at least three years, otherwise they will be required to pay back the credit. That clause helps to prevent speculators and investors from taking unfair advantage of the benefit, which is intended to help ordinary homeowners without unnecessarily burdening taxpayers or exposing them to risk.

The $8,000 credit can be used for purchasing any kind of home, including both new and existing construction. That includes single-family homes, condos, townhouses, studio lofts, manufactured homes, and even houseboats. Plus, ownership of a vacation home or rental property that is not used as a principal residence does not disqualify taxpayers from getting the benefit, as long as they still meet the other guidelines as first time buyers.

The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000, and is only being offered to those taxpayers with incomes that do not exceed $75,000. For married couples the income eligibility cutoff is doubled to $150,000, although that is of little consolation to GLBT couples who are not legally recognized as couples by the IRS because of current gay marriage discrimination statutes. Unmarried joint purchasers may, however, allocate the credit amount to any qualified buyer. The most common scenario for that type of purchase arrangement is when, for example, parents help their children buy a home by co-signing for it as joint owners.

The IRS determines the purchase date of those home that are bought from a builder based on the date that the transaction actually settled and closed. But for those building their own homes with the help of a hired contractor, the IRS views the home as purchased on the date when the owner first occupied it. So to qualify for the credit under that circumstance the occupancy date would need to fall between January 1, 2009 and December 1, 2009. The law also allows taxpayers to treat qualified home purchases in 2009 as if the purchases occurred on December 31, 2008, if they want to. This is entirely up to the taxpayer but it enables them to take the credit when they file their 2008 returns instead of waiting a year.

Naturally, the rules can get complicated in a hurry because the IRS is expert at adding layers of complexity to any calculation to give taxpayers headaches. But any qualified tax preparation professional or CPA can help determine exactly how and when to apply the rules in order to reap the rewards of the credit. Once eligibility has been verified, the whole program is as simple as pie. Participating in the tax credit program is really easy to do. Just go out and purchase a home as a qualified first time buyer and then claim the tax credit on federal income tax returns. Use IRS Form 5405 to calculate the total credit amount and then add that figure to the 1040 income tax return. No other applications or forms have to be filled out or approved by anyone at the IRS or anywhere else.

To find real estate professionals committed to exceptional service to the GLBT community, visit www.GayRealEstate.com. Or call their toll Free phone number 1-888-420-MOVE (6683).

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Jeffery Hammerberg is Founder and President of Gay Real Estate, Inc. – the nation’s largest group of companies connecting gay & lesbian home buyers and sellers to gay, lesbian and gay friendly real estate agents. Since 1997, Hammerberg has created a virtual real estate marketplace for the LGBT community.

Photo credit: www.GayRealEstate.com.