It’s important to remember that the $8,000 tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing.

Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a homebuyer is liable for $4,000 in income tax, he can offset that $4,000 with half of the tax credit… and still receive a check for the remaining $4,000!

One of the great things about being a home owner is the tax advantages that it offers.  Most of a homeowner’s mortgage payment is tax deductible, all of the interest paid, property taxes, and for many people mortgage insurance.  This can make the $8000 tax credit that much more impactful.  If a homebuyer had no tax deductible housing expenses, now they have plenty, he or she could be seeing a refund from that, and then another $8000 on top of it.