When most markets fail, the government does not do much. The housing market is different. It forms the backbone of modern America. The giant banking bailout is one big sign of its importance, but homebuyers are getting help as well.

First time home buyers are critical to real estate markets. It is a step process. Homeowners continually buy and sell to move up from one property to the next. This is how they end up with bigger homes and fuel the market.

This process starts with first time homebuyers. They are critical to the system. Without them, there is nobody moving up from the bottom and the system will come to a grinding halt.

The current market is bereft of first time buyers. Without these buyers, the market is stagnating. While there are all kinds of finance problems contributing to this, the government has acted to motivate first time buyers to get back into the market.

The Housing and Economic Recovery Act of 2008 is the magic pill. It provides a tax credit of 10 percent of the purchase price of the home up to a maximum of $7,500. Only the government would think a $75,000 home can be found, but there you go.

A tax credit is a beautiful thing. Why? It is applied directly to the tax amount you owe after doing your taxes. If your accountant tells you a check for $3,000 is due to the government, a tax credit is deducted directly from this amount on a dollar for dollar basis.

Assume I can claim this first time buyer tax credit in the amount of $7,500. I determine I owe $2,500 to the IRS after doing my taxes. I would then apply my tax credit to this and send in a return telling the agency to send me $5,000.

You are probably wondering if it is realistic to ask for more than I actually owed. Yes. This is a fully refundable tax credit. In plain language, this means that it does not matter what I owe. Not bad, eh?

So, is there a catch? Yes and it is very big. This tax credit is a fraud. Why? It must be paid back. Fortunately, you have fifteen years to do it. If you claim the full tax credit, this means paying an additional $500 a year which is not too bad.

This tax credit has another catch. It phases out for those who make significant income. Married couples making a combined $150,000 cannot claim it. Other taxpayers lose it between $75,000 and $90,000 depending on certain factors.

Everyone gripes about the loss of tax deductions, but they miss the points. Tax credits are the real golden egg for taxpayers. Claim as many as you can. If you are considering buying a home, this one should help a bunch.

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