Saturday, August 4, 2012

Common Questions: When Do I Have to Pay Back My First-Time Homebuyer Credit?

I was asked this question recently by a home owner and thought that this would start to be a more and more common question as we near the 36 month deadline established by the government when they instituted the  Housing and Economic Recovery Act. More specifically, they asked, "What happens to my tax credit if I buy a bigger house and rent out my first home?"


Important question: When did you buy your home? If you purchased your home in 2008 as part of the Housing and Economic Recovery Act of 2008, you  have to pay the entire amount back (up to $7500) in 15 installments of $500 as part of your tax returns, starting with your tax return for the year 2010. If you sell your home or it ceases to be your "main" home (i.e. you rent it out), you have to pay the remaining balance back when you file your tax return for the year in which you convert the house from your "main" home.


If you bought your home with the First-Time Homebuyer Credit under the Housing and Economic Recovery Act of 2009 or 2010, then the rules are a little different. You do not have to repay any the tax credit you received (up to $8000) if your house remains your "main" home for 36 months. However, if you sell your house or convert it entirely to a business or rental property, you must repay the full amount of the credit. 


Please let me know if you have any questions or there is anything I can help you with in regards to this topic! For much more detailed information on this topic, please see the IRS's website on the First-Time Homebuyer Credit


Disclaimer: I am not a CPA and am not offering tax advice. I am not liable for your interpretation of IRS tax law based on this summary. Please consult your CPA for answers and applications for your specific situations. 


Kyle Pfaffe, REALTOR      KylePfaffe@kw.com      512-636-9707      www.AustinHomes4You.com

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