Do I have to pay back my Home Buyer Tax Credit?
As you may have heard, there were some fairly strong tax incentives available for homebuyers from 2008 until September of 2010. The most recent first-time homebuyer tax credit for up to $8,000, as well as a repeat homebuyer tax credit of up to $6,500, lured some buyers out of the woodwork. You may have been one of them.
But did you know that you may have to pay the credit back? There are a variety of situations in which you could be required to repay all or a portion of the credit you received. If you fall into any one of the categories below, the IRS can require repayment:
1. Receipt of the First Time Home Buyer Credit for a 2008 purchase, and the subsequent sale of your home to a related party within 15 years;
2. Receipt of the First Time Home Buyer Credit for a 2009 or 2010 purchase, and the subsequent sale of your home to a related party within 36 months;
3. Receipt of any home buyer credit for your primary residence (whether it was purchased in 2008, 2009, or 2010), and subsequent condemnation of the home, UNLESS you replace it with the purchase of a new primary residence within 2 years of the date of condemnation;
4. Receipt of any home buyer credit for your primary residence (whether it was purchased in 2008, 2009, or 2010), subsequent destruction of the home, UNLESS you either rebuild it or replace it with the purchase of a new primary residence within 2 years of the date of destruction;
5. Receipt of any home buyer credit for your home (whether it was purchased in 2008, 2009, or 2010), and subsequent conversion of the home to a rental property or other business use.
Additionally, any sale of your home within three years after your receipt of either the 2009 or 2010 credits can trigger repayment of the entire credit to the IRS.
If you find yourself in a situation where you might need to repay the tax credit, you should consult with your accountant!
The instructions that accompany IRS Form 5404 provide detailed information about the criteria for receiving the tax credit, including the extended deadline. Home owners who wish to claim the home buyer tax credit should read the IRS Form 5404 instructions closely. Note that although the titles of Form 5404 and the instructions only refer to the first-time homebuyer credit, both the form and the instructions also apply to the tax credit for repeat buyers.