Now, back to business.  Recently, Congress passed the Housing and Economic Stimulus Recovery Act of 2008.  As part of this package, qualified first-time home buyers can receive a tax credit of up to $7,500 for purchasing a home this year.  This is not merely an itemized deduction - it is a direct dollar-for-dollar reduction of your tax liability.  Sounds awesome!  And in some ways, it's a great tool and a step in the right direction.  

However, what a lot of home buyers don't realize is that this is more like a loan.  You do have to pay these funds back to the IRS beginning in the second year after you take the credit.  So, if you take the credit in 2008, you will begin repaying the money in 2010.  It is unclear how the IRS will go about collecting this debt, but it would likely be added to your 1040 tax liability in your repayment year.  If you are unable to pay the debt back, you will be assessed penalties and interest on the unpaid funds.  Interest is calculated at the Federal short-term rate, plus 3 percent.  This debt will likely not be tied to your home, but rather to you, as a taxpayer, so it will not be a reduction of your profits when you sell your home.

So, I encourage you to make good use of this temporary tool, but realize the future ramifications on your tax liabilities!  This is not FREE money, but it is an interest-free 2 year loan, and that's still pretty good in my book.