This tough economy has many people scrambling for ways to fill the bank account. Fortunately for some new home buyers the government is offering incentives that will do just that. New home buyers are in a position to get free money to help with costs involved with purchasing their first home.

Congress enacted legislation that will provide a tax credit of up to $8,000 for first time buyers purchasing a new home between January 1, 2009 and December 1, 2009. It is just one more attempt to stimulate the economy and the struggling real estate industry.

First time buyers are those that have not owned a principal residence in the three years prior to this purchase. The home buyer also has to live in the house that is purchased as a primary residence for at least three years. A similar tax credit was offered in 2008, but that provision required that the tax credit be repaid to the government. This new tax credit (10 percent of the home’s purchase price up to $8,000) does NOT have to be repaid.

This tax credit is a refundable credit. That means that it is available even if there is little or no tax liability. The government will send the home buyer a check for the tax credit (minus any tax liability that might exist). Example: The home buyer owes $1,000 in taxes but qualifies for $8,000 in home buyer tax credit. The refund check from the government would be $7,000.

Home buyers are not the only ones that can benefit from this new tax credit. Individuals building a home can also benefit. The tax cod considers the constructed home purchased on the date of occupancy so any one building a home that takes occupancy between January 1, 2009 and before December 1, 2009 will qualify for the tax credit.

There is no reason to wait until filing 2009 tax returns to take advantage of the tax credit. New home buyers have several options to let them take advantage immediately. One even allows for filing an amended 2008 tax return. The best thing to do is to discuss the options with a tax professional to see which avenue would be best for each individual situation.

The American Recovery and Reinvestment Act of 2009 is designed to the real estate market by encouraging consumers to get involved. It has provisions for helping home buyers in high cost market regions, to assist buyers with closing costs and to encourage home owners to increase energy efficiency.

All of these incentives can be valuable to the home buyer. It is the tax credit that provides some of the best incentive to potential buyers. Cash in hand is much better than tax deductions and loan guarantees for most consumers. The opportunity to get up to $8000 just for purchasing a home for the first time in three years has many people considering a real estate purchase that might other wise have sat on their money during these tough economic times.