Question: I bought a house in 2008 and received the $7500 first-time home buyer credit (the first one not the $8000 giveaway). I lost my job and sold my house at a lost in spring of 2009. Do I still have to payback that $7500 credit? If so how soon? If I kept my house I would have to repay it over a 15 year period. Sean, Camden, AR

Answer: The $7,500 homebuyer “credit” was truly misnamed. It wasn’t a credit. It was a 15-year interest-free loan from the government for first-time homebuyers. You got the “credit” upfront and then you paid it back in equal installments over 15 years. (The $8,000 first-time homebuyer for 2009 that expires on November 30 is a pure tax credit. You simply pocket the money. You don’t owe anything so long as the home is your principal residence for at least 36 months after purchasing it.)

The balance of the $7,500 loan is paid off in full if you sell your home at a profit before the 15 year term is up. The amount paid back to the government, however, can’t exceed the amount of the gain. When a home is sold at a loss–as in your case–the balance of the loan is forgiven.

By the way, I find it intriguing that even the IRS on its website suggests checking with a tax professional if you sell a home bought with the $7,500 “credit/loan” with no gain or a loss. The agency knows it’s a confusing piece of legislation. So, who am I to argue with the IRS? Check with a tax pro first.