Repayment of First-Time Homebuyer Credit
The first-time homebuyer credit is covered in the Payments lesson. However, certain situations may require the credit to be repaid and reported in the Form 1040, Other Taxes section.
The 2008 homebuyer credit had different rules. The credit functions like a no-interest loan and must be paid back. Taxpayers who received the credit in 2008 should be paying back their second installment with their 2011 tax return.
Review the Life Events section of the intake and interview sheet to determine if the taxpayer:
If the taxpayer received the first-time homebuyer credit in 2009 or 2010 and the home ceases to be the taxpayer's main home within the 36-month period beginning on the purchase date, the taxpayer generally must repay the credit.
If the taxpayer received the first-time homebuyer credit for a home purchased in 2008, the taxpayer generally must repay the credit over a 15-year period in 15 equal installments. The repayment period began in 2010. Taxpayers who claimed the 2008 homebuyer credit may need to repay the second installment on their 2011 tax return. However, if the home ceases to be the taxpayer's main home before the 15-year period is up, the taxpayer must repay all remaining annual installments.
Joan received a first-time homebuyer's credit of $7,500 in 2008 and she still lives in the home. Joan paid the first installment with her 2010 return. She will pay her second installment of $500 with her 2011 tax return. The $500 is entered on the Form 1040, Other Taxes section.
The home ceases to be the taxpayer's main home in situations where the taxpayer: