Repayment of First Time Homebuyer Credit

[peggysioux]

Taxpayer received the First Time Homebuyer Credit in 2008 and has been paying the $500 per year. Taxpayer had to move for one year for a temporary job assignment and rented house out during the assignment but has moved back into home. Being taxpayer received rental income on his primary home for a temporary period, does he now have to pay back the remaining balance of the credit in 2013? IRS states once home ceases to be taxpayer's primary residence, credit needs to be paid in full. Unsure being home ceased to be primary residence for a temporary basis, but residence was rented out for one year.

[peggysioux]

Repayment of First Time Home Buyer Credit

Just bumping this up hoping to get some feedback. Much appreciated.

Peggy Sioux

[Koss]

Temporary Relocation

I don't think the rental income is relevant when it comes to the question of whether the homebuyer credit must be repaid in full. As you pointed out, the question is whether the home really ceased to be the taxpayer's primary residence.

If the home ceased to be the taxpayer's primary residence, then the credit would have to be repaid in full, regardless of whether there was any rental income. If the home did not cease to be the taxpayer's primary residence, then repayment is not triggered--regardless of whether there was any rental income.

And in my view, the rental income, in and of itself, does not determine whether the home ceased to be the taxpayer's primary residence.

I will concede that the fact that the house was rented is one factor that must be taken into account when attempting to determine whether the home ceased to be the taxpayer's primary residence. But it is not dispositive.

If there taxpayer has clear documentation that the work assignment was temporary, and that it was meant to last for only one year, then that supports the position that he maintained a permanent residence in the original home, and that he intended to return. The fact that he actually returned further supports this position.

Finally: What about driver's license and voter registration? If the taxpayer never changed them, that provides additional support for the position that it was temporary.

BMK