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 Repayment of Home-Buyer Credit

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Victor Quinn
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Join date : 2010-08-25
Location : Central New Jersey

PostSubject: Repayment of Home-Buyer Credit    10/28/2010, 10:43

What the IRS giveth...the IRS taketh back!

Two years have already passed since you accepted the $7,500 first time home buyer tax credit in 2008 and it is time to start paying it back. This repayment of the credit applies only to those who closed on their homes after April 8, 2008, and on or before December 31, 2008. Unlike some past credits, this one must be repaid over a 15-year period. As a result, the new tax credit works like an interest free loan. You take the full credit on your 2008 return, and then repay the credit amount in equal payments over 15 years, with no interest charges.
]However, due to amendments in the law, homebuyers who closed on their homes after January 1, 2009 and before Sept., 30, 2010 qualify for an $8,000 one-time credit against their income tax for 2009
or 2010 and if you closed during 2010, you can take the credit either on your 2010 return or amend 2009 to take the credit there.

2008 example:
If a taxpayer is allowed a $7,500 first-time homebuyer credit in 2008, the taxpayer must recapture the credit amount by adding $500 to your tax liability starting in 2010 and the following 14 years.
NOTE: If a taxpayer disposes of the principal residence for which a first-time homebuyers credit was allowed before the end of the 15-year recapture period, the remaining credit repayment amount is added to the income tax liability of the taxpayer for the year of sale. It is not allowed capital gains treatment, but taxed t your ordinary income rate.
In the case of an involuntary conversion (foreclosure), recapture is not accelerated if a new principal residence is acquired within a 2-year period. No amount is recaptured after the death of the taxpayer.
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