The First-Time Home Buyer Tax Credit provides an outstanding opportunity for Home Buyers.  The American Recovery and Reinvestment Act of 2009 authorizes a refundable tax credit of up to $8,000 (10% of the purchase price) for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009. 
 
The tax credit is only available for eligible first time home buyers.  

The IRS defines a first time home buyer as someone who has not had any ownership interest in a home in the 3 years prior to day of the 2009 purchase.  

The purchase of the home must be on or after January 1, 2009 and before December 30, 2009 and be used as a principal residence for at least three years. 

Single taxpayers with incomes up to $75,000 and married couple with incomes up to $150,000 qualify for a full tax credit. The tax credit is equal to 10% of the home's purchase prices up to a maximum of $8,000.  

Partial tax credits are available for single taxpayers with income exceeding $75,000 up to $95,000 and married couples with income exceeding $150,000 up to $170,000. 

If qualified, the refundable tax credit does not have to be repaid and can be claimed on either your 2009 return or you can amend your 2008 return. When claiming on your 2008 return, the taxpayers 2008 income limit will apply so the buyer will know whether the income limit will reduce their tax credit. 

Prospective home buyers who believe they qualify for the tax credit can reduce their income tax withholding up to the amount of the credit to enable the buyer to accumulate cash that can then be applied to a down payment.

UPDATE:
Feds reverse rule to assist first-time home buyers
by J. Craig Anderson - May. 19, 2009 12:00 AM
The Arizona Republic
Federal officials on Monday reversed an earlier decision to allow first-time home buyers to use an $8,000 tax credit to borrow the down payment on a home.
A week earlier, U.S. Department of Housing and Urban Development Secretary Shaun Donovan had told the National Association of Home Builders that HUD would let banks and local governments offer short-term "bridge loans" to cover the down payment for first-time buyers eligible for the tax credit. The loans would have been available to applicants for federally insured mortgages such as Federal Housing Administration loans.
Lenders, home builders and real- estate agents had reacted favorably to the bridge-loan proposal, saying it would open up the housing market to more first-time buyers.
However, not everyone was in favor of using the tax credit as collateral on a down-payment loan.
"That tax credit should be savings, not debt," said Patricia Garcia-Duarte, executive director of Neighborhood Housing Services in Phoenix.
Garcia-Duarte said the proposal too closely resembled a now-illegal practice known as seller-funded down-payment assistance, which allowed a home's seller to "gift" the down payment to a specific buyer through a non-profit organization.
Phoenix loan originator Dean Wegner was among the housing-industry professionals who had expressed enthusiasm about the bridge-loan plan.
Wegner said the program would have boosted local home sales, but he added that the bridge loans likely would have come with a high interest rate.
The loans also could have created income-tax issues, according to the IRS officials who shot down HUD's plan.