Help for Home Buyers

by Shelly Banjo

When it comes to housing, it's a buyer's market -- especially for first-time home buyers eligible for new tax breaks.

The American Housing Rescue and Foreclosure Prevention Act of 2008, passed by Congress at the end of July with hopes of shoring up the ailing housing market, also includes an important tax break. First-time home buyers who purchase a home after April 8, 2008, and before July 1, 2009, are eligible for a $7,500 tax credit (or, if the home costs less than $75,000, a credit equal to 10% of the purchase price).

This credit, however, comes with a catch. You'll have to pay it back.

Here's the good part: The credit reduces your tax liability on a dollar-for-dollar basis and can even boost your refund. If you owe $10,000 in taxes, you can take the credit and pay just $2,500. Or if you owe $5,000 in taxes and have paid it over the year, you can take the credit and receive all your money back with an additional $2,500.