There are hundreds of forums outlining the $8000 First Time Buyer Credit. I’ve been really careful not to give tax advice and have referred you directly to the IRS Form 9054 in my previous post regarding the tax credit. There are many forums where the advice given seems to counter the information on the IRS form. If you have questions as to whether you qualify, seek advice from an accountant.
The tax credit has become an integral part of “Now is a great time to buy.” First Time Buyer beware! Did you know there are provisions that will force repayment of the credit for a house purchased in 2009 (credit is set to expire Dec. 1 so you must close on or before Nov. 30)? IRS Form 9054 was updated in February to include the $8000 credit (previously a $7500 “credit” that has to be repaid over 15 years). Form 9054 reads:
Homes purchased in 2009
You must repay the credit only if the home ceases to be your main home within the 36-month period beginning on the purchase date. This includes situations where you sell the home, you convert it to business or rental property, or the home is destroyed, condemned, or disposed of under threat of condemnation. You repay the credit by including it as additional tax on the return for the year the home ceases to be your main home. If the home continues to be your main home for at least 36 months beginning on the purchase date, you do not have to repay any of the credit.
If you and your spouse claim the credit on a joint return, each spouse is treated as having been allowed half of the credit for purposes of repaying the credit.
Exceptions. The following are exceptions to the repayment rule.
- If you sell the home to someone who is not related to you, the repayment in the year of sale is limited to the amount of gain on the sale. See item 8 under Who Cannot Claim the Credit for the definition of a related person.) When figuring the gain, reduce the adjusted basis of the home by the amount of the credit.
- If the home is destroyed, condemned, or disposed of under threat of condemnation, and you acquire a new main home within 2 years of the event, you do not have to repay the credit.
- If, as part of a divorce settlement, the home is transferred to a spouse or former spouse, the spouse who receives the home is responsible for repaying the credit.
- If you die, repayment of the credit is not required. If you filed a joint return and then you die, your surviving spouse would be required to repay his or her half of the credit
You need to ask yourself how long you are going to be in your home since you just can’t take the money and run.