by Shari Held

If you’re considering buying a home you couldn’t have picked a better time. There are great buys to be had, and the latest Federal Housing Tax Credit sweetens the deal even more for qualified first-time homeowners such as John and Romy Kohler.

The Kohlers recently moved to Bloomington so Romy could attend law school. “We were trying to find an apartment in the Bloomington area, but they are so expensive here, we started thinking that we should buy a home,” John said. He investigated potential incentives to home ownership and discovered that the new Federal Housing Tax Credit did not have to be repaid, unlike former incentives that were essentially interest-free loans. “That impacted our decision considerably,” he said.

The Kohlers visited the Highlands, a Beazer community, and ended up signing papers that day. “It is very encouraging to know that there are incentives for people who are still interested in living out their dreams,” he said. “This is a dream come true for us. We are really, really excited.”

A tax credit equal to 10 percent of the home’s purchase price (up to a maximum of $8,000) is now available for first-time buyers purchasing their principal residence on or after January 1, 2009 and before December 1, 2009. “First-time buyers” are buyers who have not owned a principal residence for three years prior to the 2009 purchase date—the date of the closing when the homeowner receives the title to the property. For a married couple, neither partner can have owned a principal residence for three years prior to the purchase date.

Getting the full $8,000 tax credit also depends on income. Single taxpayers with a modified adjusted gross income (MAGI) of up to $75,000 and married taxpayers with MAGIs of up to $150,000 qualify for the full tax refund, while taxpayers with a MAGI of more than $95,000 (single) or $170,000 (married) will not receive a tax credit. The rate of return is modified for homeowners falling within those income brackets. The only “catch” is that the homeowners must use the home as their principal residence for a minimum of three years or risk paying the credit back—some exceptions do apply, however.

Matt and Rachael Cadick had already decided to build a new home on Indy’s south side, so while the tax credit didn’t influence their decision to buy, it still had a significant impact on them. “It was perfect timing,” Matt Cadick said. “My wife and I are just about ready to celebrate our first year of marriage, so it was a very good added bonus to make things easier on us and take a lot of pressure off us.” The Cadicks got paperwork indicating their closing date and the price of the home they are purchasing from Beazer Homes and are applying for the credit now, even though their closing date won’t be until later this year. They plan to use the money from the tax credit to build a fence around their new home and pay off credit card debt.

As the Cadicks found out, it’s very easy to participate in the tax credit program. It’s simply a matter of completing IRS Form 5405 to determine the amount of the credit and claiming it on Line 69 of the 1040 return. No other applications or forms and no pre-approvals are required.

The date of first occupancy or the settlement date for newly-constructed homes must be on or after January 1, 2009 and before December 1, 2009, so if you’re considering purchasing a home, there’s still time.