Repayment of First-Time Home Buyer Credit

by Barry L Weller, EA

The 2008 version of the homebuyer credit needs to be repaid in equal installments over 15 years. This pay-back feature applies only to homes purchased in 2008.  The homebuyer credit is repaid as an additional tax on your federal tax return for fifteen years, starting with your 2010 tax return. If you received the maximum $7,500 credit, this works out to annual repayments of $500 per year.  The credit will also need to be repaid in full if the taxpayer sells the house within the fifteen-year repayment period.

The first-time homebuyer credit was first available to taxpayers who purchased a principal residence after April 8, 2008. This credit was part of the Housing and Economic Recovery Act of 2008. This credit was expanded and modified in 2009 and 2010. The unique provision of the initial credit allowed in 2008 was that it had to be repaid over a 15-year period beginning on the taxpayer’s 2010 return which was due by 4/18/2011. In essence, the original credit was an interest-free loan. The maximum amount of the original credit was $7,500. So if you were able to claim the credit on your 2008 tax return, you must file form 5405 with your 2010 tax return (and all subsequent tax returns until the credit is fully repaid) and add an additional tax on the other taxes section of form 1040. If you purchased your home after 2008 and before 5/1/2010, you may have claimed a first-time homebuyer credit up to $8,000 on your 2009 tax return. Or, if you purchased a home after 11/6/2009 and before 10/1/1010 (with a binding contract dated before 5/1/2010) you may have claimed a long-time resident credit up to $6,500. Neither of these credits are subject to repayment as long as you do not dispose of the home or it ceases to be your main home during the 36 month period that follows the date on which you purchased The first time homebuyer credit can be confusing since there were several variations of the credit from 2008 through 2011.  The following is a summary of the First-Time Homebuyer Credit by Year …

• For 2008, up to a $7,500 credit was available to first time homebuyers but this credit needed to be paid back over 15 year period.
• For January through November 2009, a credit of up to $8,000 for first time homebuyers was available and this credit did not need to be paid back.
• For December 2009 through April 2010 a credit for up to $8,000 for first-time buyers was again available and this credit did not need to be paid back.
• From November 7, 2009 through April 2010, a credit was available for up to a $6,500 for "long-term residents" buying a new home.  This credit did not need to be paid back.
• Lastly, until April 30, 2011 the $6,500 homebuyer credit continued to be available for qualified members of the U.S. uniformed services.

For all versions of the homebuyer credit, if within 36 months of buying the property the home was no longer the taxpayer's primary residence, the credit needs to be repaid in full.

Barry L Weller, EA is the president of Barry Weller & Associates with offices at 216 E Philadelphia Ave, Boyertown, PA 19512 Phone (610) 367-8280    He is an enrolled agent, licensed to represent taxpayers before the IRS.   [Revised 01/03/2015]