Before You Take That New Housing Credit . . .

Part of the Housing and Economic Recovery Act of 2008 authorizes a tax credit of up to $7,500 for qualified first-time home buyers. Based on the questions I'm getting from readers, many people are ready to jump on this money like Scooby-Doo panting after Scooby Snacks.

To help those considering this credit, which is really a loan, I talked to Eric Smith, a spokesman for the Internal Revenue Service, which will be handling the implementation. Following are some questions sent to me by readers and answered by Smith:

Do you know whether this tax credit applies to mobile home purchases?

It could apply to a mobile home. The key is whether you own the mobile home and use it as your main home, Smith said.

Can you change your W-4 form so less income tax is withheld to get the money sooner than you would by applying for the credit?

If you want this money now rather than waiting to file your 2008 tax return, you can adjust the number of withholding allowances you take on your W-4 (Employee's Withholding Allowance Certificate). The amount of money withheld from your paycheck is determined by the number of allowances you claim on your W-4. The W-4 has a worksheet to help you figure out how many personal allowances to take, based on which tax deductions or credits you expect to claim on your return.

"As a general rule, people should adjust their withholding to reflect deductions and credits," Smith said. If you are not sure how to change withholding on your W-4, use the withholding calculator at http://www.irs.gov.

If you take this tax credit for 2008, when would you begin owing payments ?

Repayments begin the second tax year after you take the credit. So if you claim the credit on your 2008 tax return, you have to begin paying back the money in 2010.

Since this is a loan from the IRS, will the IRS be sending an annual loan statement to taxpayers?

The details of how the IRS will collect this money or inform people have not been worked out. Smith said a line would probably be added to the standard 1040 tax form to indicate that the credit should be paid as part of your tax liability.

Can I pay off the loan early?