There have been three pieces of tax legislation enacted in 2008/2009 to assist individuals with the purchase of a home. Here is an overview of each one:
1.   $7,500 Tax Credit - This was the first piece of tax legislation enacted in late 2008 to help "first-time home buyers" with the purchase of a home. This credit is a refundable credit, which means it can be used not only to reduce your income tax liability but also to create a refund if the credit exceeds your income tax liability.  This credit, however, has to be paid back to the IRS over a 15 year period, so it is actually more a non-interest bearing loan than a tax credit. This credit applies to homes purchased after April 8, 2008 and before July 1, 2009. A "first-time home buyer" is defined as someone who has not owned a principal residence for the three years prior to the home purchase. If you are single and your adjusted gross income, in the year of the home purchase, exceeds $75,000, the credit begins to phase out (you begin to lose the credit). If you are a married couple who files a joint return and your adjusted gross income, in the year of the home purchase, exceeds $150,000 the credit begins to phase out. You must be at least 18 years old to be eligible for the credit.

2.   $8,000 Tax Credit - The second piece of tax legislation to help home buyers, increased the credit for "first-time home buyers" to $8,000 for purchases made between January 1, 2009 and April 30, 2010 (or June 30, 2010, if you have a signed contract by April 30, 2010 and close on the home by June 30, 2010). It too is a refundable tax credit (The amount of your credit will be first credited toward any tax liability for the year of purchase.Then the remainder will be refunded to you), and is not required to be paid back to the IRS.  If you are single and your adjusted gross income, in the year of the home purchase, exceeds $125,000, the credit begins to phase out (you begin to lose the credit). If you are a married couple who files a joint return and your adjusted gross income, in the year of the home purchase, exceeds $225,000 the credit begins to phase out. Above those incomes, the amount of the tax credit decreases until the maximum limit is reached –$145,000 for an individual or $245,000 in joint income.The credit is disallowed if your new home purchase exceeds $800,000. You must be at least 18 years old to be eligible for the credit. Members of the military serving outside the United States for more than90 days will have until June 30, 2011, to qualify for the tax credit.

3.   $6,500 Tax Credit - This third piece of tax legislation was enacted to help existing homeowners who purchase a new home after November 6, 2009 and before May 1, 2010 (or June 30, 2010, if you have a signed contract by April 30, 2010 and close on the home by June 30, 2010). If you lived in the home you are selling for any five consecutive years during the previous eight years, you are eligible for this $6,500 tax credit. It too is a refundable tax credit (The amount of your credit will be first credited toward any tax liability for the year of purchase.Then the remainder will be refunded to you), and is not required to be paid back to the IRS. If you are single and your adjusted gross income, in the year of the home purchase, exceeds $125,000, the credit begins to phase out (you begin to lose the credit). If you are a married couple who files a joint return and your adjusted gross income, in the year of the home purchase, exceeds $225,000 the credit begins to phase out. Above those incomes, the amount of the tax credit decreases until the maximum limit is reached –$145,000 for an individual or $245,000 in joint income. The credit is disallowed if your new home purchase exceeds $800,000. Thus, a home buyer credit is now available to retirees downsizing their home or for younger buyers stepping up to a bigger home. You must be at least 18 years old to be eligible for the credit.Members of the military serving outside the United States for more than90 days will have until June 30, 2011, to qualify for the tax credit.