Remeber the First Time Homebuyer Tax Credit?

March 27, 2012


In 2009 and a portion of 2010, the government offered a a tax credit to first time homebuyers. The property purchased was required to be the principal residence of the purchaser. As long as the property remained the purchaser's principal residence, there was no requirement to repay the credit. However, if the property purchased with the tax credit ceased to be a principal residence before 36 months of ownership and residing in it, there is a requirement to repay the credit.


To report the payment of the tax credit, Form 5405 of the IRS will give instructions as to how to report the tax that comes due after a sale prior to 36 months of home ownership.


Selling the property, converting it to a rental, losing it in foreclosure are some of the ways the home will cease to be a principal residence.


If you received the tax credit, it is important that you understand the tax ramifications that a change in the use of the property can bring about.


Check with your tax advisor or the IRS to get the best advice.