First-time homebuyer credits were credits that reduced the amount of tax you owed on your tax return. You can no longer claim these credits as they could only be taken for the 2008, 2009, and 2010 tax years. However, these credits can still affect those that took the credits when it comes to selling their home in later years. The amount of the credit that could be taken differs between 2008, 2009, and 2010. In certain instances, you are required to repay all or a portion of your homebuyer credit. The circumstances for repayment differ between years. First we’ll discuss the 2008 credit.
If you took the 2008 homebuyer credit, you are obligated to repay that amount. You can think of it as an interest free loan that the government gave you when you purchased your home. You should have received a notice one year after you bought your home explaining the amount of the credit you took and how much you will be required to pay back each year. As you know if you took the 2008 homebuyer credit, the amount you are required to repay either increases your tax due or decreases the amount of your refund. The IRS no longer sends out notices, so in order to look up the amount you need to repay each year, and your remaining repayment balance, you can go to the First Time Homebuyer Credit Account Look-Up. Usually, your repayment is made up of equal payments each year until you’ve repaid the full credit you took. However, if you sell your home within 15 years after the purchase, you are required to pay the remaining balance of your credit in full. This also applies if you no longer use that home as your main home, for instance if you converted to use primarily for business or as a rental property. The rules for repayment change slightly for credits taken for the 2009 and 2010 tax years.
If you took a homebuyer credit in 2009 or 2010, you are not required to repay the credit UNLESS you sell your home within three years of purchase. If you sell your home, or the home is no longer your main home, within three years, you are required to repay the credit in full on your tax return in the year you sold the home. An important form to remember whether you’re repaying the 2008, 2009, or 2010 credit, is Form 5405. You will need to fill out this form and attach it to your tax return in the year you sold your home or no longer use the home as your main home. You only need to fill out this form if you sold the home within the 15 year period for the 2008 credit, or within 3 years for the 2009 and 2010 credits. By filling out this form, you are telling the IRS that you sold your home or it is no longer your main home, and the amount of the credit that you are repaying.
For the 2009 and 2010 credits, the three year period has already passed, to state the obvious. However the 2008 homebuyer credit can still affect many people who decide to sell their home this year or in the few coming years.
Feel free to spread the word below!
The Tax Bleep 