Tuesday, December 28, 2010

Repaying 2008 First-Time-Homebuyer Credit

If you were a first-time homebuyer and received a credit of up to $7,500 in 2008, you agreed to repay the credit at a rate of 6 2/3% (or $500) in equal payments over 15 years, with no interest charges.  The tax credit worked like an interest free loan.

The recapture period begins with the second taxable year following the year of purchase for which the credit is taken - 2010.  The recapture amount is added to your income tax liability each year for 15 years, beginning in 2010.  YOU WILL NOT RECEIVE A BILL OR REMINDER FROM THE IRS!

If you dispose of the principal residence for which a credit was allowed (or if it ceases to be your principal residence) before the end of the 15 year recapture period, the remaining credit repayment amount is added to your income tax liability for the year of sale or cessation of use.

(The law was changed in 2009 increasing the amount of the credit and providing that you do not have to repay the 2009-2010 credit, provided the home remains your main home for 36 months after the purchase date.)

No comments:

Post a Comment