It looks like a $7500 tax credit for first time homebuyers will be a part of the housing stimulus package being signed by President Bush today. Please pass this along to any first time homebuyers you work with who are closing on a home between April 9, 2008 and July 1, 2009.
They can take a $7500 tax credit on their 2008 or 2009 tax return. Tax credits are more fun than deductions because the credit is a dollar for dollar reduction in tax liability – ie if you owe less than $7500 in taxes, the government will erase the tax liability and send you a check for the difference. If you owe more than $7500, the credit will reduce your tax liability by the credit amount.
One note – this is basically a loan from the government. They want people to have the money now, but it will have to be repaid starting in 2010 (at a rate of $500 per year, or in full when the house is sold – no interest). There are also income requirements. You can see complete info here: