Your Tax Questions Answered
Home Buyer Credit: When It Comes
Time to Repay
Kiplinger editorial director Kevin McCormally and fellow tax experts Peter Blank and Mary Beth Franklin tackle your most pressing tax challenges.
By Kevin McCormally, Editorial Director, Kiplinger.com
December 11, 2009
QUESTION:
I noticed a post said that you must repay the $8,000 home buyer’s credit if you sell the home before owning it for three years. The post also said "(The payback can’t exceed the amount of profit you make on the sale, though.)"
I assume that applies to the $6,500 credit also. Does the “can't exceed the amount of profit” part also apply? I assume it does. That being the case, if you sell in less than three years and do not make a profit, do you still owe the "payback"? Is the cost basis for determining profit just the original purchase price or does your broker commission for selling the house also count as part of the cost? I guess what I am asking is if the incentive could be used to help offset a loss if the home is sold in less than three years?
KEVIN ANSWERS:
Happy to help. First, yes, the obligation to repay the credit – if the home is sold within three years – is limited to your profit on the house. So, if you have a loss on the house, you would not have to repay the credit. However, note this: your basis in the house – the amount from which you determine gain or loss – is reduced by the amount of the credit you receive. So, if you buy a $100,000 house and get a $6,500 credit, your basis is $93,500. Amounts you make on the sale over that amount would be profit. Realtor’s commission you pay when you sell do not add to your basis BUT it does reduce your proceeds of sale…so it has the same tax impact.
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Reader Comments (6)
Posted by: Ceil at 12/16/2009 02:21:49 PM
What a "Rip Off" for the trusting 2008 First Time Home Buyers! EXAMPLE: Home bought in December, 2008 = $7500.Benefit: MUST BE PAID BACK! Home bought a week later, 2009 = $8000.Benefit: payment? NO! 2008 First Time Home Buyers have lost $8000. A TAX AMENDMENT IS NEEDED. ! !
Posted by: FILING FOR THE 8,000 TAX CREDIT at 01/28/2010 02:21:00 AM
FILING FOR REFUND ON THE 8,000 TAX CREDIT. DO IT TAKE ABOUT MONTHS TO GET IT AFTER YOU FILE YOUR TAXES. IF SO CAN I FILE MY REG. TAXES AND THEN GET IT BACK AND GO BACK IN FILE AN TAX AMENDMENT FOR THE 8,000. ARE DO I HAVE TO FILE FOR BOTH AT THE SAME TIME AND WAIT THE 4 MONTHS FOR THE REFUND. THANKS, S. LEE
Posted by: LISA at 02/02/2010 12:49:32 PM
i agree with CEIL. I bought my house in November 2008 and must repay my tax credit, but people after me don't have to repay it! How is this fair? A tax amendment is DEFINETLY NEEDED!
Posted by: Jim Hubbard at 02/22/2010 09:17:19 PM
Yes I bought in oct 08 so I`m to repay my first time home buyer credit? And how do I repay it ? I had my taxes prof done for me and they never did anything towards it ?
Posted by: Shawn at 02/23/2010 12:30:47 AM
Lisa if you bought your home in 2008 and sold today...you would NOT have to repay the tax credit...as you will have likely have LOST money.
Posted by: Josh at 04/12/2010 07:04:07 AM
I am trying to understand how the payback works as I have to sell my house due to a breakup. I purchased my home for $290,000 an received the $8,000 first time buyer credit. If I sell for $282,000 I am in the clear and do not have to pay anything, but if I sell for more than that I have to pay back. If I sell for $283,000 do I only have to pay $1,000 back? I appreciate the help, the IRS site is way too confusing for me!