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Some first-time homebuyers will get a boost when they file their taxes. A new tax credit was created last year to help stimulate the economy, and it calls for a $7500 tax credit for people who bought homes.

But as NPR's Katia Dunn reports, critics say this tax credit doesn't live up to its promises.

KATIA DUNN: Ruth Ramberg is, in many ways, a perfect candidate for this policy. She's single, 72 years old and lives off just Social Security and one small annuity. When she bought a condo in Palo Alto last year, her accountant told her she qualified for the first-time homebuyer credit.

Ms. RUTH RAMBERG: Oh, I was ecstatic.

DUNN: Before she bought, Ramberg says she was struggling to make her rent on her small monthly income. She figured if she could buy something straight out, she wouldn't have a mortgage payment at all. So she went all in. She cashed out her retirement and paid $135,000 in cash for her one-bedroom condo.

Ms. RAMBERG: This was my last hurrah.

(Soundbite of laughter)

DUNN: Ramberg says the government's offer of a tax credit would've helped her out a lot and confirmed that she was making the right choice.

Ms. RAMBERG: That seemed like, you know, the universe was okay with this, and then I was going to be able to really not be anxious.

DUNN: But when Ramberg's accountant started looking over her finances, he realized there was a problem. Because she took the money out of her retirement fund to buy the house, her income technically jumped beyond $75,000 and over the limit for eligibility in this program.

Mr. DAVID HATT (Accountant): It's unfair.

DUNN: That's David Hatt, Ramberg's accountant. He says Ramberg wasn't his only client this year to have this problem, and he's frustrated with the government.

Mr. HATT: They encourage people to buy a home, but the people with low income take out money from their IRAs, as my clients did. Except when they take money out, it puts them above the threshold for taking this credit.

DUNN: Some accountants say even if clients made first-time home purchases last year and were eligible for the tax break, they advised them not to take it, because the credit is really a debt in disguise.

Ms. CONNIE KURTZ (Tax Agent): It basically was, you know, taking a credit card out and having a debt that you were incurring when you were trying to buy a new house.

DUNN: Connie Kurtz is a tax agent, sort of a fancy accountant licensed by the federal government. She says the word credit is not accurate. The 2008 rules require homebuyers to pay back the $7500 to the federal government, $500 every year.

Ms. KURTZ: You know, people were afraid, because you think about this: you have to pay that back on your tax returns. So if you end up owing the IRS money at the end of the year because of this, then you also owe them interest and penalties.

DUNN: Kurtz said she only advised clients to take the loan if it meant the difference between buying a house or not buying a house.

Ms. KURTZ: I probably had, so far, I think one has taken it and the rest of them said no.

DUNN: But for people buying in 2009, there is very good news. The rules changed under President Obama's stimulus package. Kurtz says it's a big improvement. It raises the credit to $8,000 and eliminates the requirement to pay it back.

Ms. KURTZ: This is like money.

(Soundbite of laughter)

Ms. KURTZ: This is like winning the lottery and this is like $8,000 that you get to keep.

DUNN: People who bought last year say they wish they had known a better deal was coming. Amanda Wise is a life coach. She lives in Maryland. She bought a house in 2008.

Ms. AMANDA WISE: You know what I feel like doing sometimes - is going in a price adjustment on my house.

DUNN: If she had bought just a few months later, she would've benefited from the more generous tax credit now in place. But even the 2009 tax credit has its critics because it still has an income eligibility limit. Some tax professionals argue giving the break to all first-time homebuyers would really stimulate the economy. The Senate Finance Committee says they wanted to avoid letting people with low wages, but high amounts of other kinds of income use the credit.

Katia Dunn, NPR News, Washington.

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