The 'As the Stomach Turns' financial-rescue aftermath continues. I imagine the only ones benefitting from such a struggle are the manufacturers of Pepcid and Mylanta heartburn potions! But there are little glimmers of hope these days, here and there.

One involves the First-Time Home Buyer Tax Credit — $7,500 from the Fed. Yes, you will need to pay it back, interest free over 15 years, or when you sell, whichever comes first. But if you stay in your new home for the full 15-year term, you'll pay back exactly $500 each year, on your annual income tax return. Here at our offices, our phone lines and e-mails have been inundated with many questions about the new program.

Details of the tax incentive
The tax incentive was part of the massive housing relief package that came out of Congress a few months ago, before the current 'crisis legislation' became all-consuming!

Most first time home buyers qualify for the credit, so long as your total household income is less than $75,000 (for single taxpayers), or $150,000 (for couples filing jointly). There is also a time limit to the credit — it only applies to homes purchased between April 9, 2008 and July 1, 2009.

In addition to the federal program, there are several local and state programs that offer incentives to first-time buyers. Some, however, cannot be used in tandem with the federal incentive, but a few can.

In Chicago, first-time home buyers (and non-first timers in certain targeted city neighborhoods), can enjoy a direct income tax reduction of up to 20 percent of mortgage interest paid, up to a maximum of $2,000 each year, for as long as you own your home. The maximum allowable family income, for a family with three or more people, is $105,560 in city-target neighborhoods, $86,710 in non-targeted city neighborhoods.

In tax areas, the maximum single-family home purchase price to qualify is $398,315 in targeted areas, $325,894 in non-target neighborhoods across Chicago. You can find about more about Chicago's TaxSmart Mortgage Certificate Program on the city's Web site. The I-Loan Program is similar for houses throughout Illinois. Unfortunately, you cannot take advantage of these programs together with the federal program.

Extra incentives
Other Chicago-area communities have special down-payment assistance programs available for buyers that purchase their new home within their communities. These incentives CAN BE COMBINED with the federal First-Time Home Buyer Tax Credit program.

About 50 miles south of Chicago, the city of Kankakee, IL, offers as much as $7,000 down-payment grants and up to $1,500 in closing-cost credits to first-time buyers in their community. The family income ceiling in Kankakee is comparatively low at $48,650, but the down payment assistance program can be used in combination with the First-Time Home Buyer Tax Credit. Both the Chicago and Illinois programs offer lender contacts who offer slight discounts on mortgage interest rates. In some cases, these local and state programs do not have to be repaid.

Both programs include recapture provisions — if the subject property is sold within nine years, at a profit, and the owner's household income increases beyond a maximum level allowed, the buyer may have to pay a prorated portion of the tax credit earned.

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