Repaying the first-time home buyer tax credit

Taxpayers who claimed the $7,500 first-time home buyer tax credit two years ago need to be ready to pay come tax day 2011, reports the Philadelphia Inquirer. On Monday, April 18, the first of 15 annual payments is due on that loan. Article source – First-time homebuyer tax credit: Get ready to pay by MoneyBlogNewz.

Using the first time home buyer credit

A segment of new United States homebuyers were eligible to claim a tax credit equal to 10 percent of the purchase price of a home, up to a maximum of $7,500. The tax credit could possibly be divided by unmarried homebuyers or married individuals filing separately could get $3,750 each, according to the House and Economic Recovery Act of 2008. Any homes bought between April 8, 2008 and January 1, 2009 was able to get the credit.

The tax credit was very popular for several individuals. The problem was that it was being called “credit.” Really it was just an interest-free loan be given out. Yearly, for 16 years, the first-time homebuyers may have equal installment payments to be repaying the government. A $7,500 first-time home buyer tax credit will break down to $500 per year, unless the home is sold before the total amount is paid off. When selling the home, the balance is due immediately. It isn’t paid over time anymore.

Tax breaks homebuyers can get

The first-time home buyer tax credit was not the only thing Congress did. There were two other tax credits extended. The first offered an $8,000 credit to first-time buyers who signed contracts between January 1, 2009 and April 30, 2010. As long as the contract had been signed by April 30, the sale could be completed by September 30, 2010, and the taxpayer could qualify for the credit. There was also a $6,500 credit accessible. This was for long term homeowners that bought, between November 7, 2009 and April 30, 2010, a new or existing home.

Both of these additional tax credits require that homebuyers repay the entire amount – either $8,000 or $6,500 – if the home is sold within three years of the purchase date or the property becomes a secondary a secondary residence within the same time period. It is simple to sell within three years nevertheless. There are ways around it. The sale of home may end up with a profit. If that profit is less than the amount of the tax credit, then only the profit needs to be paid back.

All the IRS returns trouble

Married couples filing jointly have been hard on the IRS. There have been lots of glitches in this, the Inquirer states. With the Form 5405: “First-Time Homebuyer Credit and Repayment of the Credit,” several filed before February 22, 2011. That means manual returns were required taking a long time to process.

Internal Revenue Service projections indicate that about 1 million United States households could be repaying the $7,500 first-time home buyer tax credit. You can go to IRS.gov and look at the “Where’s My Refund?” connection to discover out more if you don’t have your refund.

Information from

Housing and Economic Recovery Act

frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h3221enr.txt.pdf

IRS

irs.gov/newsroom/article/0,,id=204671,00.html

Philadelphia Inquirer

philly.com/philly/phillywomen/119915874.html

How Canada helps first-time home buyers

youtube.com/watch?v=lg_i8SRhMO0