Question: "I will qualify as a first-time homebuyer and am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?" - Adam Billings, Knoxville, Tenn.
Adam Billings, 28, teaches math at Powell High School in Knoxville. He is seen here with his wife, Shelby.
Experts: Robert Dietz, economist, National Association of Homebuilders
Answer: Yes. Taxpayers get everything they're already entitled to plus the credit. Think of it as a dollar-for-dollar reduction in your tax liability that continues beyond zero. So, if your total tax bill is $5,000 before the credit, your tax bill drops below zero and the government owes you $3,000.
If you owe $5,000 and had $5,100 withheld during the year, you would ordinarily receive a $100 refund but instead, the IRS would cut you a check for $8,100. If you had $4,900 withheld and would have had to send the government $100 when you filed, you would get $7,900 back. (For a full explanation, click here.)
This refundable feature is very favorable to first-time homebuyers because the credit will give the majority of them more back than they paid in. It is also applicable to 2008 or 2009 taxes, so taxpayers who have already filed for 2008 can file an amended return and get the credit.
NEXT: Paying back previous tax credit