February 05, 2012
The IRS recently announced that it will no longer send you a reminder to repay your First-Time Homebuyer Credit. However there is now an on-line tool to keep you up to date on the status of your repayment.

Background

In an effort to stimulate the sluggish home retail market, the government passed laws to provide principal residence purchase assistance for first-time home buyers. An early version of the laws provided much needed funds to help with the down payment on initial homes. However, the money needed to be repaid to the government over a 15 year period. Later laws provided home buying assistance and eliminated the need to repay the funds.

What should you do?

First, determine if you took advantage of the early first-time homebuyer program. How? Check your 2008 tax return. Homebuyers who qualified were allowed a one-time credit against their 2008 income tax. The credit applied to a principal residence purchased after April 8, 2008, and on or before December 31, 2008. If you took the credit on your 2008 return, you were then required to repay the credit amount in equal payments over 15 years, with no interest charges.

Second, if the credit applies to you, determine the status of your repayment. You can do this online with a handy new tool provided by the IRS at:IRS Homebuyer Credit Account Status Tool

What you need to access the tool: Social Security number, date of birth, and your full address

This tool will tell you what the IRS thinks you have already paid and what must still be repaid.

Third, make your repayment entry as part of your 1040 tax return. The amount is added to your tax or subtracted from your refund.

Remember that if you used this credit and you then sell your home (or it is no longer your principal residence) you must be prepared to repay the entire outstanding balance of the credit.
Topic: Advice