So .... are they REALLY giving me $7500 in free money?

Buried in the recently enacted federal housing legislation- 2008 American Housing Rescue and Foreclosure Act- is a First Time home buyer 'tax credit' for up to $7500. The credit is only available for purchases made between April 9, 2008 and July 1, 2009.

There are a few limitations to receiving this 'credit':
• It is limited to first time homebuyers
• There are income limits: $75,000 for single purchasers, $150,000 for couples. (The amount starts being reduced if you make over $75,000 and phases out at $95,000 for singles, and $170,000 for couples)
• The credit is not issued as a check. It is an itemized deduction on your federal tax returns.

• It is for 10% of your purchase price up to $7500.

One thing that needs to be made clear however, is this 'tax credit' has to be paid back over the next 15 years or if you sell your home. The credit works more like an interest-free loan. Two years after you have claimed this credit, you will have to start paying it back.

There is a lot of buzz –both positive and negative about this 'credit'. My take- despite having to pay back the credit, I would be VERY HAPPY to take a 0% interest loan of $7500 from Uncle Sam. Even if I invested it in a 'safe vehicle' at a compounding 5% interest every year, I would make about $4,343.30 in real dollars (adjusted for inflation and taxes)– and $4,343.30 would buy a heck of a lot of shoes!

DISCLAIMER: I am NOT an accountant- and I don't play one on TV. To find out how this tax credit would affect your particular situation, please talk to your accountant. I would be happy to refer one to you.