Repayment of First Time Home Buyer Tax Credits

[NotEasy]

If I remember correctly, the $7,500 in the form of an interest free loan has to be repaid in the 2010 income tax return. Is it correct?

[ChEAr$]

If I remember correctly, the $7,500 in the form of an interest free loan has to be repaid in the 2010 income tax return. Is it correct?

Almost. While it is true one can opt to repay the whole loan on the 2010 return, the usual practice will be to spread the payments over the allowable 15 years at the rate of $ 500 per year.

[LCP]

FWIW...Yesterday I saw my first notice from the IRS that shows the amount needed to be paid back each year.

You need to be careful because it appears that they are sending one to the taxpayer and spouse showing half of the amount for each.

[okie1tax]

Repayment in divorce

Client and spouse divorced, decree stated each to pay their half ($250). Form 5405 "suggests that if one gives up the residence as part of the divorce, the spouse who keeps the house is responsible for the repayment.

[BP.]

Divorce

Client and spouse divorced, decree stated each to pay their half ($250). Form 5405 "suggests that if one gives up the residence as part of the divorce, the spouse who keeps the house is responsible for the repayment.

I have one where the couple divorced, and incident to the divorce the deed was transferred into the wife's name, who will be solely responsible for repayment. IRS got the real estate transfer records, and sent husband a letter (I didn't see it yet) that he has to repay because the home is no longer his principal residence. Of course, that's not correct, but the point is the letters can't necessarily be taken at face value.

[NotEasy]

Almost. While it is true one can opt to repay the whole loan on the 2010 return, the usual practice will be to spread the payments over the allowable 15 years at the rate of $ 500 per year.

Thanks.

I know this is a stupid question...where do we enter the $500 pay back in their tax return? Any form needs to be filed for it?

[Burke]

Form 5405. I think it is page 2.
PS: IRS website has a good page on this and the situations where payback is required. It's not just the 2008 ones in some circumstances.

[BP.]

where do we enter the $500 pay back in their tax return? Any form needs to be filed for it?

Form 5405, p. 2, Part IV, line 16. Transfers to 1040, line 59.

[dmj4]

5405 has a box for divorced and relinquishing to spouse

In my situation, the couple was never married. Each took half the credit on their return when the house was bought. They parted ways in 2009. There is a box for divorced, but not for unmarried couples. She kept the house and he moved out in 2009. How do I show this on his return (no longer his house).

[Jesse]

Thinking out loud

Interesting situation.

The credit follows the house - not the person in the case of divorce, but since not a divorce but actually if he gave up his 1/2 ownership of the house he may be required at that point to pay back his entire loan?

[BP.]

She kept the house and he moved out in 2009.

You might have to consider if/how hs name was removed from the deed- did he sell his ownership to the other person?

[dmj4]

IRS Says:

I found nothing on this is the IRS pubs or Questions and Answers. So, I called the IRS and emailed them, which is something I almost never do. Both responses matched. He has to pay back his half on 2010, because he no longer lives in the home and she is not an ex-spouse.

There were children involved, so I feel sure there were court proceedings during the separation. He comes in Monday, so I will find out more about the transfer process for the home. My thoughts are that even if an appraisal was done, she most likely would not have owed him any money to purchase his half of the home. Would a token sales price make enough of a difference to consider it a sale for no gain? IRS would lose his half of the repayment.

Last year when he had just separated or was thinking of separation, I told him I thought the repayment followed the home. I didn't realize that situation would be restricted to ex-spouses.

Thanks for your help!