Pay Back the Homebuyer Tax Credit?

Did you know that you have to pay back the homebuyer tax credit if you claim it and then sell your house (or otherwise stop using it as your principal residence) within the next three years? I didn’t, but apparently that’s the case. Here’s the scoop straight from the IRS:

Q: When must I pay back the credit for the home I purchased in 2009?

A: Generally, there is no requirement to pay back the credit for a principal residence purchased in 2009. The obligation to repay the credit on a home purchased in 2009 arises only if the home ceases to be your principal residence within 36 months from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being your principal residence. (source)

Note that there are no exceptions for military personnel who are deployed and sell their home. If they move out during deployment but retain ownership, the deployment “may be” considered a temporary absence such that the home can technically remain their primary residence.

If you find yourself subject to the recapture provision, you are required to repay the credit in full as “additional tax” when you file your Federal income tax return for that year. See IRS Form 5405 for additional details.

16 Responses to “Pay Back the Homebuyer Tax Credit?”

  1. Anonymous

    I bought my home in march 2010. Had it 2.5 years. Went through a divorce. Husband lost his job 8 months ago, the house lost value and wanted to move closer to my daughters in another state. I know I will have to pay it back. On fixed income and hope they take payments. I am deaf, age 59 and retired. I made $1,700. on the house. Just enough to get into an apt. in another state. Hope they don’t beat me up to bad. Will they take payments to pay the 8 grand back? What a mess.

  2. Anonymous

    We purchased our home 9/25/09. We can’t afford and want to sell to down=size before we loose it. Can we do that without paying it back?

  3. Anonymous

    I HAVE A CLIENT THAT GOT THE FIRST TIME HOMEBUYER CREDIT BACK IN 2009 AND BOUGHT THE HOUSE JUNE 1, 2009
    AND HE WANTS TO SELL IN MARCH OR APRIL. IS THERE AN
    EXCEPTION TO HAVING TO RECAPTURE THE $8,000 TAX CREDIT
    IF HE SELLS THE HOME AT A LOSS ? HE BOUGHT IT AT
    $120,497 COULD HE SELL IT FOR $112,497 AND ESCAPE THE
    RECAPTURE. HE’S LOOKING AT SELLING IT IN MARCH OR APRIL
    OF THIS YEAR.

  4. Anonymous

    Quoted from IRS.com

    “In many cases, the credit repayment (recapture) requirement is waived for members of the uniformed services, members of the Foreign Service and employees of the intelligence community. This relief applies where a home is sold or stops being the taxpayer’s principal residence after Dec. 31, 2008, in connection with government orders received by the individual (or the individual’s spouse) for qualified official extended duty service. The credit is still allowable even if this happens during the year of purchase. Qualified official extended duty is any period of extended duty while serving at a place of duty at least 50 miles away from the taxpayer’s principal residence (whether inside or outside the U.S.) or while residing under government orders in government quarters. Extended duty is defined as any period of duty pursuant to a call or order to such duty for a period in excess of 90 days or for an indefinite period.”

  5. Anonymous

    What if we sell our home earlier than 36 months from original purchase date after getting the 8000 tax credit? CLosing was 03-15-2009….we may try to sell late this year OR after the 2 year mark. Is there a different pay back if we sell b4 or after the 2 year anniversary

  6. Anonymous

    Thats not true, read line 12: “I (or my spouse if married) am a member of the uniformed services or Foreign Service, or an employee of the
    intelligence community. I sold the home, or it ceased to be my main home, in connection with Government orders for
    qualified official extended duty service. No repayment of the credit is required (see instructions). Stop here.”

    If you get deployed you don’t have to pay it back. Read the form.

  7. Anonymous

    I have been considering buying a home, however, within a year and a half I will have to move in order to go to school. If I dont sell the residence or buy a new home, but instead rent out the house and rent an apartment for my self for the time I am gone, do I still have to pay back the tax credit?

  8. Anonymous

    I just learned this after going gong ho into looking at residences. Needless to say I am not gong ho on buying a residence now; I might move within 3 years. So silly provision. Wont stimulate anything. Whats wrong with speculation in this environment too? We should be doing everything and anything to encourage investment right now; I dont like the way we are going.

  9. Anonymous

    I think this is a totally reasonable clause. The last thing that we should encourage is people using this to buy a house and then sell it again. I can’t imagine in this market though that anyone would be able to recover their investment in less than 36 months unless they were buying a foreclosure property at a firesale price.

    There are always going to be legitimate reasons why someone might have to sell their house (like military or job move) but better to reduce the fraud that would occur in 98% of cases than worry about every possible nuance that affects the 2%. If people are worried about that, they shouldn’t buy the house.

    As it is, this is a gift to anyone that waited to buy a house, but its only going to pull sales forward and make us feel a little better till its over.

    At some point, paying the 12 trillion tab for all of these wonderful programs in the last 30 years will become a reality.

  10. Anonymous

    Pretty clearly Congress intended to forestall speculators from buying and flipping houses on the taxpayer dime. It would have helped, though, if they’d made some provision for people in the military.

  11. Anonymous

    I didn’t know that either… I’m not in the scenario where I could take advantage of the tax credit anyway though.

    The tax credit was rushed in, and they probably didn’t think thru all of the ramifications.

    Thanks for bringing this to light!

  12. Anonymous

    DH are in this boat. He is military and it is very probable that we’ll have to move before 3 years. So we’re planning on stashing the 8K in our savings account until we are here for 3 years or they change the rules, particularly regarding military personnel.

  13. Anonymous

    Ya, I read that about the tax credit before i started looking at houses. I was on the fence for a while on whether or not I wanted to commit myself to my current hometown for 3 years minimum. in the end I decided that It shouldn’t be a major problem to stay here at least that long. If there is something enough better to justify paying it back in order to move then I will have to cross that one when I get to it.

Leave a Reply