First-Time Homebuyer Credit
I just closed escrow on the purchase of my first ever house in July 2009. Is my Realtor correct that I can file an amended 2008 tax return to claim the special credit for first time homebuyers? Is he also correct that this credit is mine to keep forever and doesn’t need to be repaid? I had read somewhere that the credit was just an interest free loan that had to be repaid on future tax returns. It sounds too good to be true.
Your Realtor is correct that you won’t have to wait until April 15, 2010 to receive this credit, which can be as much as $8,000. You have the option to claim the credit on your original or amended 2008 1040, as long as the purchase has been completed.
As always, this kind of thing should be handled by a professional tax preparer, whose software should have the ability to properly calculate the credit on Form 5405. This can get tricky if your modified Adjusted Gross Income is over $75,000 ($150,000 for married couples) because that places you into the dreaded “Evil Rich” category as defined by our imperial rulers in DC.
In regard to repaying the credit, there was a change in the original program from what we had in 2008. For homes purchased in 2008, the credit must be repaid in 15 annual installments, starting with the 2010 1040. If the home ceases to be the main residence before the 15 year repayment tine is up, the remaining amount of the credit will be due in one lump sum on that year’s 1040.
For homes purchased between January 1, 2009 and December 1, 2009 (the current end of the credit qualification period), the credit does not have to ever be repaid if you use the home as your primary residence for at least three years. If you move out of the home, sell it or convert it to business or rental usage before the three year anniversary of your purchase, you will be required to repay the full amount of the credit in one lump sum on the tax return for the year in which the home ceased to be your principal residence.
If you don’t already have your own professional tax preparer, be careful of who you use to prepare the amended 1040. As IRS has announced in this press release, they have discovered some unscrupulous preparers who are soliciting clients who don’t actually qualify for the credit. If you happen to use one of those preparers, your credit will be disallowed and your full tax return will most likely be audited by IRS.
As with any tax law, there are even more twists to this one; so be sure to work with a professional tax advisor.
Good luck. I hope this helps.