Did you receive a home buyer tax credit and it is time for you to repay it? The Internal Revenue Service has a tool to help you determine how to handle repayment on your tax return.
You may have to pay back the credit if you purchased a house in 2008 and took the credit, possibly up to $7,500, on your tax return for 2008.
Many who took the credit didn’t realize that it was a no-interest loan that had to be repaid over 15 years beginning with the 2010 tax return. Essentially, the government offered a tax benefit to entice more homeowners to purchase. These type of strategies are used on businesses to entice them into coming to a particular community.
Did you utilize the credit to buy a home “under value” to obtain the credit and then moved? The IRS is onto that game as well. You would have to repay the credit if you bought your home and then sold it or if you still own the home, but it is not your main home anymore.
Often stimulus bills and credits come in ways that consumers feel it is free money, but this is just a reminder that there isn’t a “free lunch,” although some of the other credits in 2009 and 2010 may not have to be repaid.
Make sure you stop by Liberty Tax® and we will help you determine your specific situation.
Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.