The real estate market in much of the United States looks like a boxer after going 10 rounds with Mike Tyson in his prime – bloodied, bruised and in pain. Tax credits have been instituted to try to stop the pain, but buyers should know about a big caveat with these.

The federal government has tried to stop the punishment in the real estate market in the only way it seems to know how – by throwing money at the problem. The continued use of this general strategy is causing a lot of people to question just how we are going to deal with the out of control national debt. Therein lies the rub with the homebuyer tax credit. You see, it really isn’t a credit. It is a loan.

The government has long been in the real estate loan game, if indirectly, through Fannie Mae, HUD and other entities. The first time homebuyers tax credit represents a new and bold direct approach to the market. How so? Well, the program is really just a down payment loan program for buyers.

The tax credit works like this. If you haven’t owned a home the previous three years, you are considered a virgin buyer. This means you can get a credit of up to $8,000. The program is also about to be extended to include current owners who trade up to new homes. They’ll be able to get a $6,500 windfall.

Ah, but is it really a windfall? No! This benefit has to be repaid to the government! Anyone who takes advantage of the program must repay the amount claimed over the next 15 years when they file their taxes. A person claiming $8,000, would have to pay an additional $533 on their federal taxes annually. That actually isn’t too bad, but it clearly is a loan by any definition.

The government has been spending money like a drunken sailor in port for the first time in six months. In this one situation, at least, the idea of giving people a loan instead of a giveaway seems to be a good one.

Richard A. Chapo writes for BusinessTaxRecovery.com – learn how the first-time homebuyer tax credit extended legislation arose and what it means.

Article Source: http://www.a1articles.com/article_1230171_33.html

Occupation: Attorney and Traveler Rick Chapo is with Nomad Journals – makers of writing journals.

He is also with BusinessTaxRecovery.com – information on taxes.

http://www.nomadjournals.com