Repaying the Home-Buyer Tax Credit
Recently I met with a Ann Arbor home seller who is just shy of living in his home for three years. He has a new job located out of state and was inquiring about repaying the home-buyer credit he received in 2010. There are different rules depending on the year you claimed the home-buyer tax credit.
2008 First-time homebuyers who purchased new homes in 2008, subject to certain criteria, were eligible for a maximum credit of $7,500, which must be repaid over a 15-year period.
There is no requirement to pay back the credit for a principal residence purchased in 2009 or early 2010.
The obligation to repay the credit arises only if the home ceases to be your principal residence within 36 months from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being your principal residence.
If, within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Use this 5404 IRS form.
Repaying the credit if the home you bought is no longer your primary residence, here are some example to think about:
Examples of when your home stops being your main home:
- You sell the home.
- You transfer the home to a spouse or former spouse in a divorce settlement.
- You convert the entire home to a rental or business property.
- You converted the home to a vacation or second home.
- You no longer live in the home for the greater number of nights in a year.
- Your home is destroyed or condemned.
- You lose your home in foreclosure.
- You die. (1/6/11)
If you are selling your Ann Arbor area home,talk to a CPA or Tax Attorney if you received the first time home buyer credit in 2008,2009,or 2010 or call the IRS.
Unexpected life events happen, job transfers,divorce, financial challenges can require a home owner to sell their home before they planned. One of the key stipulations to the $8000 tax credit was that the homeowner had to live in the property as their primary residence for 3 years.