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Question about the $7,500 First-time Home Buyer Tax Credit

franzcatch 2,652 December 8, 2009 at 05:58 PM in Chat (2)
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I was a first-time home buyer when I bought my house in April of 2008. When I filed my taxes in 2009 I took the full $8000 tax credit that I was eligible for. At the time when I filed for the credit, I am pretty sure I read that it HAD to be paid back each tax season over 16 years ($500 per tax season).

I am now in the process of selling my home and have the understanding that I will definitely have to pay it back. However, I will make sure the house doesn't sell until January so I don't have to worry about the sale until I pay my taxes in 2011.

My question is this:
Will I have to pay the $8000 back in full or can I still make the $500 payments each tax season until it is paid off?

Thanks.

Found this... wonder how accurate it is:
http://www.massresources.org/page...bpages=yes

Quote :
2008 Homebuyer tax credit: You must start paying back the credit two years after the year you bought the house. You pay back the credit over a 15-year period as an additional tax on your tax return. If you claim a $7500 credit, for example, you must pay back about $500 per year. Note: The tax credit is basically a 15-year interest-free loan from the government.

If you stop living in the house as your primary residence, or if you sell the house before the 15-year repayment period is over, you must pay back the balance of the tax credit in full. In special situations, you do not have to pay back the full amount (for example if you do not make enough profit from the sale of the house to pay back the credit, or if the taxpayer dies).
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World dominator and rebel
2,565 Reputation
#2
wasn't the credit begging like at the end of april?
In any case, if you bought in 2008, it was a loan, if you bought in 2009, it was a credit (with restrictions)....
in any case, since you are selling before 3 years, you have you pay it back in any case

edit:
if you make money off the sale, then you have to pay up to the $8000 (if you made less than $8k, then only the amount you made). If you actually lost money, I think you don't have to pay it back.
And when I mean made money, it is out of the basis cost. So if it cost $100K, then your basis cost was $92K.
It was actually supposed to be only 7500, so I think you screwed up!
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#3
I got in on this too. i bought in july 2008.

lets say i purchase at 100k and put 10k in improvements and sell for 115k.

Will i have to pay back the full 7500 or just the profit?
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#4
Quote from dayv View Post :
I got in on this too. i bought in july 2008.

lets say i purchase at 100k and put 10k in improvements and sell for 115k.

Will i have to pay back the full 7500 or just the profit?
You will have to pay back the full amount, the closing attorney can add it to the HUD1 for you and pay it out of the proceeds.
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World dominator and rebel
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#5
Quote from dayv View Post :
I got in on this too. i bought in july 2008.

lets say i purchase at 100k and put 10k in improvements and sell for 115k.

Will i have to pay back the full 7500 or just the profit?
you cost basis would be $102,500, so you would have to pay back the full $7500, and then you make $5000, for which you still have to pay regular income tax.
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#6
Quote from SDRebel View Post :
you cost basis would be $102,500, so you would have to pay back the full $7500, and then you make $5000, for which you still have to pay regular income tax.
if i'm hearing you right...

i'm boned if i need to sell before the economy turns around.
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World dominator and rebel
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#7
Quote from dayv View Post :
if i'm hearing you right...

i'm boned if i need to sell before the economy turns around.
it depends on what you call boned..... if you mean paying back money you got, then yes laugh out loud
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L7: Teacher
2,652 Reputation
Original Poster
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#8
Okay... I bought the house in April 2008 for $89,500.
I did a refinance this year and rolled a bunch of CC debt into the loan taking my total mortgage up to about $110,000.

I am trying to sell for $124,900. After taxes, closing costs, and real estate commission, I would definitely have to pay it back. However, if the house sells for as low as $118,000 I will essentially break even after the fees. Would I still have to pay the fed loan back in this case?

http://www.irs.gov/newsroom/artic...31,00.html

Quote :
If you sell your home, all remaining annual installments become due on the return for the year of sale. The repayment is limited to the amount of gain on the sale, if the home is sold to an unrelated taxpayer. If there is no gain or if there is a loss on the sale, the remaining annual installments may be reduced or even eliminated. Taxpayers are urged to consult a professional to determine the tax consequences of a sale.
I suppose I will need to consult a tax professional if I break even.
I wonder if there is a way to setup a payment plan of some sort with the IRS?
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#9
Quote from franzcatch View Post :
Okay... I bought the house in April 2008 for $89,500.
I did a refinance this year and rolled a bunch of CC debt into the loan taking my total mortgage up to about $110,000.

I am trying to sell for $124,900. After taxes, closing costs, and real estate commission, I would definitely have to pay it back. However, if the house sells for as low as $118,000 I will essentially break even after the fees. Would I still have to pay the fed loan back in this case?
How would you "break even" if you bought it for $89,500 in 2008 and sell it for $118,000? You're going to show a significant gain if you get anywhere near your asking price. It doesn't matter that you rolled other debt into a new loan; your cost basis is $89,500.
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#10
Quote from emelvee View Post :
How would you "break even" if you bought it for $89,500 in 2008 and sell it for $118,000? You're going to show a significant gain if you get anywhere near your asking price. It doesn't matter that you rolled other debt into a new loan; your cost basis is $89,500.
Plus you will have to pay income tax on the profit: sales price -[original sales prices + RE commissions], on top of paying back the tax loan since you did not own it for 24 months.
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#11
If you stop living in the house as your primary residence, or if you sell the house before the 15-year repayment period is over, you must pay back the balance of the tax credit in full. In special situations, you do not have to pay back the full amount (for example if you do not make enough profit from the sale of the house to pay back the credit, or if the taxpayer dies).
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L7: Teacher
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Original Poster
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#12
Quote from emelvee View Post :
How would you "break even" if you bought it for $89,500 in 2008 and sell it for $118,000? You're going to show a significant gain if you get anywhere near your asking price. It doesn't matter that you rolled other debt into a new loan; your cost basis is $89,500.
Good point. The "cost basis" is the key point.

I will just make sure the house sells in 2010 so I don't have to pay it back until tax season in 2011. Should give me plenty of time to scrounge up the cash.

Oh, and you all are correct... it was $7,500.
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World dominator and rebel
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#13
Quote from franzcatch View Post :
Good point. The "cost basis" is the key point.

I will just make sure the house sells in 2010 so I don't have to pay it back until tax season in 2011. Should give me plenty of time to scrounge up the cash.

Oh, and you all are correct... it was $7,500.
the cost basis would be 89,500 - 7500 + upgrades, so make sure you consider that.
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Slickdeals Janitor
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Staff
#14
Wow, people can buy houses for 89k...MA sucks Sadwalk
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#15
Quote from BostonGirl View Post :
Wow, people can buy houses for 89k...MA sucks Sadwalk
yeah, tell me about it! I showed someone my little house who lived in VA--you know what their response was....nice house for @ 90,000! Little did they know that the house is valued an extra 300,000! I will be paying for this tiny little house when I'm in my 90's!!
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