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  1. #1
    Join Date
    Oct 2014
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    9

    Default Repayment of the First Time Home Buyer Tax Credit

    Hello, i bought a townhouse and received $6500 first time home buyer at 2009. A few months after i bought it, i let other people rent the house for one year. Then i moved back to live for the last 3-4 years or so. I did filed tax to repay that $6500 last 3 years for $500 each year. Do i still have to pay back the remaining even if i moved back to live for last 3 years? And if i have to pay back the remaining, is there anyway I can request to pay the remaining $5000 out of my pocket instead of $500 each year? I don't want to bring my tax debt to my marriage joined tax.

  2. #2
    Join Date
    Sep 2011
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    OH10
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    17,019

    Default Re: First Time Home Buyer Tax Credit

    Call the IRS, tell them you were a naughty boy and want to pay in full.

  3. #3
    Join Date
    Oct 2014
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    8,238

    Default Re: First Time Home Buyer Tax Credit

    Quote Quoting Andrew34
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    Do i still have to pay back the remaining even if i moved back to live for last 3 years?
    Yes. Once you ceased using it as you personal residence and rented it out to others have the first year, you triggered the credit recapture provision.

    Quote Quoting Andrew34
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    And if i have to pay back the remaining, is there anyway I can request to pay the remaining $5000 out of my pocket instead of $500 each year? I don't want to bring my tax debt to my marriage joined tax.
    Something is wrong here. If you bought the home in 2008 (and thus claimed the credit on the 2008 return filed in 2009) then under the provisions of the first-time homebuyer credit that applied that year, you had to repay the $6,500 credit over 15 years, which comes to $433 per year. This repayment applied as long as you lived in the home. If you sold or stopped using it as your personal residence then you owed back the entire $6,500 credit for the tax year that you moved out, less whatever credit you already repaid in that year. You don’t get to repay that recapture in installments.

    If you bought the home in 2009 (and thus claimed the credit on your 2009 return or made the election to report on your 2008 return) then the rules were slightly different. For those home purchases, you did not have to repay the credit at all unless you sold the home or ceased using it as you personal residence within the first three years you had the home. Again, though, if you ceased using it as your personal residence during that three year period, the entire $6,500 credit must be repaid for the tax year that it ceased being your personal residence.

    The bottom line is that for the year that you ceased using it as your personal residence, the entire credit had to be repaid. You don’t get to repay that in $500 chunks over a period of years.

    Even for a home bought in 2008, the repayment of the credit that was due if you did NOT move out was $433/year, not $500. So the facts as you’ve presented them indicates there’s a problem here that you need to fix. I strongly suggest you seek advice from a tax professional to fix whatever that problem is.

  4. #4
    Join Date
    Oct 2014
    Posts
    9

    Default Re: First Time Home Buyer Tax Credit

    I am not even sure why. In 2009, i told the cpa i will let my house for rented, but the cpa told me just claim the $6500 first time buyer first, at the most, i will just repay it back. In 2011, i told my new account, and he told me i dont have to pay all at once, i just have to pay $500 each year. In 2012, i filed tax with new accountant, and he told me the same thing, continue repay $500 each year. This year, we ( my wife and I) have a lot of changes in our marriage, so we both agree even if we divorced in the next 1-2 year, we will put the tax refund in the account for our child for child expense. I don't want ( i received the $6500) in 2009, but now it takes out $500 each year into my child expense (since tax refund 2014-2015 will put in seperate account for child expense.). That will make me feel i took $6500, but steal $500 each year from my child expense for the next few year. I just want to pay it all back with my money, and in 2014 tax, i don't have to pay that $500 any more, and whatever we get from tax refund, it will be all for our child.

  5. #5
    Join Date
    Oct 2014
    Posts
    8,238

    Default Re: First Time Home Buyer Tax Credit

    I have no idea where those CPAs got the idea you could repay it at $500/year. Something is amiss here. The statute requires that once you cease using it as your personal residence, the entire credit must be repaid on the tax return for that year. See the following IRS page which spells out the same rules for the recapture that I did in my earlier reply: Repayment of the First-time Homebuyer Credit.

    Are you sure the $500/year is for repayment of this credit and not something else? Print the IRS page I linked and discuss with a tax professional (perhaps someone different than the guys you used before) why you are paying this at $500/year when the law requires you to pay it back all at once when you cease using it as your personal residence. Make sure the person you consult is truly a tax professional, i.e. someone with training specifically in tax law and who devotes most of his/her practice to tax. Not all lawyers and CPAs are tax experts.

  6. #6
    Join Date
    Sep 2012
    Posts
    1,991

    Default Re: First Time Home Buyer Tax Credit

    this sounds like it's not so much "allowed" so much as the IRS not pushing the matter because you are paying down the debt faster than the interest and penalties accumulate.

  7. #7
    Join Date
    Oct 2014
    Posts
    8,238

    Default Re: First Time Home Buyer Tax Credit

    Quote Quoting Lehk
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    this sounds like it's not so much "allowed" so much as the IRS not pushing the matter because you are paying down the debt faster than the interest and penalties accumulate.
    Andrew34 seems to indicate that this $500 a year is included in his tax return each year. That is not how the IRS collects delinquent tax liabilities. It may set up a monthly installment agreement for the taxpayer or allow other repayment options, but none of that is done by adding some tax or charge to each year’s tax return.

    If no agreement was reached on repayment, the IRS would offset ALL of the taxpayer’s future refunds, not just $500, to help collect it.

    Something is not right with the facts as presented, and Andrew needs to sort it out before the IRS catches on to the problem.

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