Tax Topic

First-Time Homebuyer Credit (and...time to pay back the 2008 credit)

Purchases Made in 2008 – Recapture of Credit
The Housing and Economic Recovery Act of 2008 provided a refundable tax credit for first-time homebuyers who purchased a principal residence in the U.S. after April 8, 2008, and on or before December 31, 2008. Homebuyers who qualified received a one-time credit against their income tax for 2008; however, this credit must now be re-paid. Those taxpayers who claimed the credit must generally begin the 15-year recapture in 2010 by increasing their income tax liability $500 per year. Consequently the credit is effectively a 17-year interest free loan. The recapture may be accelerated if the taxpayer disposes of the residence or ceases to use it as their primary residence.

For details refer to IRS Topic 611 – First-Time Homebuyer Credit – Purchases Made in 2008: http://www.irs.gov/taxtopics/tc611.html


Purchases Made in 2009 and 2010
The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases made in 2009 and closed on or before November 30. Subsequently, on November 6, 2009 The New Worker, Homeownership and Business Assistance Act of 2009 extended the deadline, changed some of the rules and added a $6,500 maximum credit for long-time residents who owned their same home at least five consecutive years of the past eight years. Taxpayers who had a binding contract to purchase a home on or before April 30, 2010, were now eligible for these credits. Initially buyers were to have closed on the purchase by June 30, 2010; however the close date was ultimately extended to September 30, 2010 by The Homebuyer Assistance and Improvement Act of 2010. The credits for 2009 and 2010 do not have to be paid back unless the home ceases to be the taxpayer’s main residence within a three-year period following the purchase.

For income limits and details on qualifications see IRS Topic 612 – First-Time Homebuyer Credit – Purchases Made in 2009 and 2010: http://www.irs.gov/taxtopics/tc612.html

If you purchased a home in 2010 as your primary residence and meet the above criteria, please provide us with the HUD-1 Settlement statement from the purchase. If a "long-time resident," also provide proof of ownership for five consecutive years of the past eight years.

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