Friday, July 2nd, 2010

How does the tax credit work if we sell before 3 years?

tax credit
Casey asked:


My husband and I just bought a house 2 hours away from our home town and now that we’re here we really aren’t liking it. We qualified for the first time home buyers tax credit, but still haven’t filed the paper work. We were told that we had to live in our house for 3 years, but if we don’t file for the credit is there still a penalty? And if we filed for the credit, but still moved before the 3 years, would we have to pay back the credit all at once?

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3 Responses to “How does the tax credit work if we sell before 3 years?”

ibu guru Says:
July 4th, 2010 at 7:46 pm

If you do not file for the tax credit, you will not get it, and you will not have any problems. If you get the credit, then sell, you have a big, messy and very expensive problem, starting with repayment of the tax credit, with interest, penalties, etc. Of course you have to pay tax bills “all at once!” The IRS is not a bank or credit-granting institution. Their job is solely to collect (or as some say, empty your wallet entirely).

lightupthesky25 Says:
July 6th, 2010 at 4:57 am

If you have not filed for the first time homebuyer credit and choose not to, you will not receive the credit and therefore will not have to repay anything.

If you file for the credit, according to the IRS website, the full amount of the credit is due in whichever year you move from the property. So if you receive $8000 and move in 2010, you will owe the IRS $8000 when you file your 2010 taxes next April.

Othniel Says:
July 7th, 2010 at 3:56 pm

If you didn’t apply for the first time home buyers credit then go ahead and sell. If you didn’t get it you are free to do what you want to do. Just make sure that your loan does not have a prepayment penalty. Also you may lose money when you sell and may even have to bring money to closing in order to sell.

If you receive the credit then you will have to pay it back if you sell within the three year period. My advise it not to apply for it because even if you decide to rent the house within the three year period you will be required to pay any money received back to the government.

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