Q: I came across your website as I was trying to look for answers as to my home situation. I lived in Philadelphia, PA for most of my life. I bought a house there in March of 2009.
When I bought the house, I got the $8,000 first-time home buyer tax creditA Tax Credit is an amount by which tax owed is reduced directly. In other words, a dollar-for-dollar amount is subtracted directly from the taxes you owe. I got from the government. I’m wondering if have to pay back some or all or the tax credit. On the IRS website, it says you have to pay it back under “certain circumstances.”
I moved out of my home in June 2010. Since then, it’s been rented and I now live in an apartment in Florida. Will I have to pay back the $8,000 first-time home buyer tax credit?
A: When you purchased your home in 2009, you were fortunate to have qualified for the first time home buyer tax credit of $8,000. When you filed your 2009 federal income taxes, you received a dollar-for-dollar benefit equal to $8,000. That means if you owed the IRS $10,000 in federal income taxes, you only had to pay $2,000.
But to keep that tax credit you had to continue to live in the home for at least three years. If you fail to keep the home and use it as your primary residence, you’ll have to repay the tax credit back to the IRS. There are some exceptions to the requirement to repay the first time home buyer tax credit, but they are limited.
If you sell your home, you are required to repay the first time home buyer tax credit based on the amount of profit you make on the sale of the home. If you have no profit, you won’t have to repay the tax credit. But the sale must be to a person unrelated to you.
Also, if your home is condemned, you go through a divorce and have to get rid of the home, or if you die, you wouldn’t have to repay the first-time home buyer tax credit (but your spouse may have to repay your share if your spouse ceases to use the home as his or her primary residence).
In your case, you didn’t sell the home and you stopped using it as your primary residence. In that case you will have to file form 5405 with the IRS and you will have to add to amount of the tax credit back into your return as an amount you owe the IRS.
Please consult with your tax advisor for more details.