Tax Credit for New Homebuyers May Get Better

The credit was originally designed as a loan one had to pay back. That may no longer be the case.

If you bought a new home last year -- or are planning to buy one this year -- you may be able to cash in on a juicy new tax break when you file your 2008 federal return

You can claim a tax credit equal to 10% of the purchase price -- up to $7,500 -— if you bought a principal residence after April 8, 2008. (A tax credit, which reduces your tax bill dollar-for-dollar, is more valuable than a tax deduction that merely reduces the amount of your income that is taxed.) To qualify for the tax credit, you (and your spouse if you are married) cannot have owned a home during the previous three years.

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Mary Beth Franklin
Former Senior Editor, Kiplinger's Personal Finance