WASHINGTON -- Should you give the $7,500 homebuyer tax credit a second look? Now that Congress may be on the verge of transforming it into a true tax credit -- one that never has to be paid back -- you just might want to do so.

On Jan. 15, the House Democratic leadership outlined its $825 billion economic stimulus package, loaded with $275 billion in tax cuts and $550 billion in new spending on health care, education, alternative energy and infrastructure improvements.

Tucked away in the tax section was a significant improvement to last July's congressional effort to stimulate home sales. That program offered a credit of up to $7,500 to purchasers who had never bought a house or hadn't owned one during the previous three years. To qualify, taxpayers would need to close on a house between April 8, 2008, and this coming July 1.

But relatively few consumers were attracted to the plan because unlike virtually all other federal tax credits, this one had to be repaid in full to the IRS over a 15-year period. In effect, the $7,500 was more like an interest-free installment loan from the government than a straightforward dollar-for-dollar reduction on buyers' tax bills.

Though final details on a revised credit are still subject to negotiations between the House and Senate -- and to passage of the economic stimulus package itself -- there's a good chance that buyers who sought the credit in 2008, and new purchasers in 2009, will be relieved of the repayment requirement.

According to industry estimates, removing the repayment rule could lead to an additional 202,000 purchases this year. The National Association of Realtors is pushing for the July 1 deadline to be extended to Dec. 31, opening the door to even greater numbers of sales.

Meanwhile, the IRS has come out with two recent advisories on the credit, plus a new Form 5405 for taxpayers interested in claiming the $7,500 benefit, either for 2008 or 2009. You can download a copy of the form at www.irs.gov in the publications and forms section. Continued...