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Time to repay that First-Time Homebuyer Tax Credit.

tax creditPeople who claimed the first-time homebuyer credit on their federal income tax return in 2008 will need to begin repaying that tax credit on their 2010 tax return. The homebuyer credit is still available until April 2011 for military personnel.

Repaying the First-Time Homebuyer Credit

The 2008 version of the homebuyer credit needs to be repaid in equal installments over 15 years. Unlike any other tax credit, the homebuyer credit must be repaid over 15 years. This pay-back feature applies only to homes purchased in 2008.

 

The homebuyer credit is repaid as an additional tax on your federal tax return for fifteen years, starting with your 2010 tax return. If you received the maximum $7,500 credit, this works out to annual repayments of $500 per year. You could think of this tax credit as an interest-free 15-year loan. The credit will also need to be repaid in full if the taxpayer sells the house within the fifteen-year repayment period.

 

The credit also needs to be repaid in full if within 36 months of buying the property, the home is no longer the taxpayer's primary residence. This provision applies to all versions of the homebuyer credit. The credit will be disallowed if a taxpayer sells the house before the end of the same year in which the house was purchased.

You will utilize Form 5405 to calculate your repayment of the homebuyer credit. The IRS advises, "If you are required to repay the credit, complete Parts III and IV of Form 5405. Attach the form to your Form 1040. Include the repayment on Form 1040, line 59, and check box c." (Publication 17, chapter 37.)

 

Comment balloon 0 commentsTodd Armstrong • March 02 2011 03:06PM
Time to repay that First-Time Homebuyer Tax Credit.
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People who claimed the first-time homebuyer credit on their federal income tax return in 2008 will need to begin repaying that tax credit on their 2010 tax return. The homebuyer credit is still available until April 2011 for military personnel. &… more