How does the new homeowner tax credit affect my regular refund?

Question

I am planning on buying a house next month and would qualify for the 7500 tax credit. I usually have a 4-500 tax refund when I file my taxes, so can I expect to receive 8000 next year?

Answer 1

Yes, but you have to pay it back.

All things being equal, you would receive $7500 more in 2008 and then $500 less for the next 15 years.

Also, if you sell the house before the 15 years are up, you have to pay back the remaining balance right away.

Answer 2

It will affect it for 16 years.  Yes, you would probably get the credit next year.  But it's really an interest free loan, to be paid back over 15 years at $500 a year, so it will come out of your refund, or you'll owe, in future years.