First-time home buyers get a tax credit of up to $7,500 for buying a main home after April 8, 2008 and before July 1, 2009.  To be eligible, purchasers must not have owned a principal residence in the U.S. in the previous three years. The credit phases out between $150,000 and $170,000 of AGI for married couples and $75,000 to $95,000 for single filers. It is refundable to the extent it exceeds the buyer’s regular tax liability, but does not offset the AMT.  Home buyers in 2009 can elect to take the credit on their 2008 income tax returns.

But the credit is recaptured ratably over 15 years, without any interest, starting two years after the year the credit is claimed. Thus a first-time home buyer who claims a $7,500 tax credit for a purchase in 2008 must pay an extra $500 of income tax in 2010 and in later years. If the homeowner sells the residence before the credit is fully repaid, the seller is taxed that year on the lesser of the gain from the sale (if sold to an unrelated party) or the unrecaptured balance of the credit.