Tax and Finance

The Tax Attic with Jerry Coon – July 23, 2009

July 23, 2009 // 0 Comments

  First-time homebuyer credit needs to be clarified Over the past few weeks, we have received a number of calls requesting further information and clarification on the federal government’s first-time homebuyer credit. The confusion relates to the differences between the credit that was available for homes purchased in 2008 and the credit available for homes purchased in 2009. Federal Form 5405 is filed to claim either of the credits. However, if the home was purchased in 2009, there is a box that is checked indicating that the home was purchased between January 1, 2009 and November 30, 2009. If this box is checked, the amount of the credit is $8,000. If this box is not checked, the home is presumed to have been purchased between April 8, 2008 and December 31, 2008. The amount of the credit for these 2008 purchases is $7,500. The 2009 credit is $8,000 and the 2008 credit is $7,500 for a difference of only $500, an apparently small amount. But the main difference is much more than the $500. The 2008 credit is really a loan and must be paid back at the rate of $500 per year over 15 years. The $500 will be considered an added tax beginning in the 2010 tax year. We are presuming there will be a line added to the tax return where the $500 will be entered. In our world of phenomenally high-powered computers, the Internal Revenue Service (IRS), without a doubt, will track this credit and will expect the $500 to be paid each year. There will be no interest charged on the $7,500. It just has to be re-paid at the rate of $500 per year. If the taxpayer sells the house before the full amount of the loan has been repaid, the unpaid remaining amount must be paid on the next filed tax return. For houses purchased in 2009, the $8,000 credit is not a loan. It is a true refundable credit and does not have to be re-paid. The purchasers must keep the house as their primary residence for the next three years after the purchase, or the entire $8,000 must be paid back. There is no proration of the $8,000. Either the purchasers get the full credit to […]