Tax Credit Payback
Head’s up! Did you buy a house in 2008?
Remember that homebuyer tax credit? That wasn’t a gift y’all! Check out the fine print. If you bought a house in (technically between April-December) 2008 and way back then took advantage of the maximum $7,500 homebuyer tax credit on your ’08 return – it’s pay back time. That $7,500 works out to installments of $500 bucks a year over 15 years. No, it’s not an early April Fool’s joke, and yes, you agreed to pay it back. The credit was really an interest free loan. You’re also supposed to repay the loan in full if you sell that home within the 15 years, but there are (go figure) some special rules that might reduce the repayment amount. And if you no longer consider this your primary residence you have 36 months from the date of purchase to pay it back. It is really a confusing little monster so my advice on this one is make sure your tax preparer is up-to-speed. For example, if you’re newly divorced and a transfer of the house is part of the settlement or if you… well, die, you could be off the hook completely. Hmmm… again this affects homes purchased in 2008 not in 2009 or later, and the credit gets repaid as an additional tax on IRS form 5405 your 2010 return. Click HERE the direct link the IRS for details.