In 2008, Congress passed a law that offered a tax credit of $7,500 to anyone who purchases a home for the first time, up until June 30, 2009. Tax credits are better than deductions. Generally speaking, if you are entitled to a tax credit, you get the full amount, even if you owe less taxes than the amount of the credit. (As always, consult an accountant for your specific situation.)

Pretty sweet, huh? Except there was a big catch. Taxpayers taking advantage of the credit had to pay it back over 15 years, $500 at a time. That’s really not much of an incentive to buy a home!

Congress has seen the light, and the stimulus bill that the Senate and House passed yesterday raises the credit to $8,000 — with no required payback. President Obama is expected to sign the bill into law ASAP. The credit is still limited to first-time home buyers, but it should help stimulate a sluggish housing market. (“First-time homebuyer” is rather liberally defined as “not owning a home in the previous three years.”)

To qualify, you must purchase a home between January 2, 2009 and November 30, 2009. The credit also phases out for single filers with adjusted gross income over $75,000 and joint filers over $150,000.

There have been some reports that you can actually claim the credit on your 2008 taxes — meaning you could possibly get access to the money in 2009 (rather than when you file your taxes in 2010). But I have read conflicting stories on this. I’ll update as soon as the dust settles and there is clear info on this point.

(I would have preferred the $15,000 tax credit that was in the original version of the bill. Which also would have applied to ALL home buyers, not just first-time home buyers. Oh well.)