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First Time Home Buyer Tax credit.

A first-time home buyer tax credit of up to $8,000 is one the housing incentives found in the 2009 American Recovery and Reinvestment Act.

The new credit is designed to boost sales in the nation's sagging housing market.

According to, chief economist Lawerence Yun of the National Association of Realtors, predicts home buyers will purchase an additional 300,000 homes in 2009 as a result of the tax credit.

"The impact will likely not be felt for at least three or four months, because it generally takes buyers that long to qualify for a mortgage and search for a home," says Yun.

The new credit improves on a first-time home buyer credit passed in 2008, Yun says. That credit had to be paid back over a period of 15 years, making it more of a loan than a true credit.

"We think this year's tax credit will certainly have a much bigger impact because it is a true tax credit which is also refundable," Yun says. "For instance, if you owe $1,000 in taxes and qualify for the first-time home buyers tax credit, you will receive a tax refund of $7,000."

Yun believes activity spurred by the new credit will help bring down housing inventory and stabilize prices.

"The greatest part of this tax credit is that home buyers can take the credit on their 2008 tax return even when they have purchased the home in 2009," 

Home buyers can take advantage of this filing exception in one of three ways: closing on the home prior to April 15, 2009, getting an extension to file taxes later in the year or filing an amended return.