We bought a house in 2008 and got the first time homebuyer credit of 7500$. We sold the house in 2009 due to expected military orders. (We ended up NOT getting military orders) We took a 14,000$ loss on the sale of the house. Last year we made an “installment” payment on the credit of 500$. This year we filed our taxes and expected the same 500$ installment payment. I just received a notice from the IRS stating that due to repayment of the first time homebuyer credit our refund due of 2178$ had been recalculated to a BALANCE DUE to the IRS of 1928$.
Why do we owe and is there anything that we can do about this? We do not have that extra money laying around, we are a one income family with the military being our only source of income.
Thanks for your questions.
Question #1: Do you have to repay the 2008 $7500 homebuyer credit “loan” when you have a $14,000 loss on your residence sold in 2009?
For the 2008 credit, if you sell your home to a third party, you have to repay the amount of the credit only up to the amount of the gain on your sale. If you had a loss of $14,000, it appears you do not have to repay the credit.
See the second to last bullet on this link.
This exclusion is very factual in nature- so the details are important.
Question #2: How can you repay your outstanding balance with the IRS, if it is, in fact, owed?
If you do not have the funds to repay your homebuyer credit, you can ask the IRS for an installment agreement. You can now repay the amount in monthly payments up to 72 months. Keep in mind that the IRS will keep your refunds during the time that you are under an installment agreement.
I hope this helps Theresia. The taxability question requires you pull together all of the facts and, if it is determined that it is not taxable, you contact the IRS to have the repayment reversed.
Jim Buttonow is one of the resident debt experts here at GetOutOfDebt.org that helps people for free. Jim is a licensed CPA who spent 19 years with the IRS coordinating large compliance teams of IRS agents and specialized personnel. In the last 5 years, Jim has invented consumer and practitioner software and treatises on how to address many different tax issues. He has also represented many people before the IRS examination, collection, filing, and appeals functions. He currently assists taxpayers on an active pro bono tax practice aimed at serving people in need. He can be reached at IRSMind.com.
If you have a tax question you’d like to ask just use the online form. I’m happy to help you totally for free.Homebuyer Credit and Taxes. Do We Have to Pay the IRS? - Theresia by Jim Buttonnow