News

Is the homebuyer tax credit a loan? Is it a credit? Is it a one-time check for a couple grand? Does it ever have to be repaid? These are all good questions, and questions we’re not sure everyone knows the answers to. As tax time is upon us, it’s more important than ever to understand such things.

In late January, we wrote a post on the homebuyer tax credit because many consumers were complaining about just how long it was taking to receive their check. The reason for the delay? Due to rampant fraud surrounding the program, the IRS decided to change the documentation it required in order for homebuyers to receive their “credit.”

A short paragraph in the latest Kiplinger Tax Letter points to the fact that the IRS still doesn’t have the fraud problem under control. Furthermore, this item also provides some very definitive answers to the questions: “Is the homebuyer tax credit a loan? Is it a credit? Is it a one-time check for a couple grand? Does it ever have to be repaid?”

According to the tax letter: “The IRS has a new way to police the recapture of the home buyer credit: It will check public databases of real estate sales. If a person buys a home between Jan. 1, 2009 and April 30, 2010 and sells within three years, the tax credit is [repaid to the IRS]. The $7,500 credit for purchases between April 9 and Dec. 31, 2008 is recouped over 15 years, but the remaining balance is due if the home is sold early.”

By this reckoning, if you bought a home in 2008, you got more of a loan than a credit. Ironically, the IRS agrees (emphasis added):

For 2008, the credit applies to a principal residence purchased by the taxpayer after April 8, 2008, and on or before December 31, 2008. Homebuyers who qualify are allowed a one-time credit against their income tax for the year of purchase. Unlike some past credits, this one must be repaid over a 15-year period. As a result, the new tax credit works like an interest free loan. You take the full credit on your 2008 return, and then repay the credit amount in equal payments over 15 years, with no interest charges.

If you bought a home between January 1, 2009 and April 30, 2010, you don’t have to repay it, provided that you hold your home longer than three years, otherwise your credit must be repaid in full:

The obligation to repay the credit arises only if the home ceases to be your principal residence within 36 months from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being your principal residence.

Here are two scenarios of what will happen if you sell your home (purchased in 2009 – 2010) within three years of receiving the tax credit:

Example 1: Taxpayer, a first-time homebuyer, purchases a home for $100,000 in 2009 and claims an $8,000 first-time homebuyer credit. In 2011, the taxpayer sells his home for $120,000. He has no adjustment to basis. The taxpayer must pay an additional tax of $8,000 for 2011.

Example 2: Assume taxpayer in example 1 sold his home to an unrelated person for $98,000 in 2011. He has no adjustments to basis. To determine the amount of gain for recapture purposes, the taxpayer’s $100,000 basis is reduced to $92,000 by the $8,000 credit. His gain for this purpose is $6,000 ($98,000 amount realized minus $92,000 basis). Taxpayer must pay an additional tax of $6,000 for 2011.

While we aren’t tax experts, if you have any questions regarding the tax credit, you can submit them in the comment section of this post, or click the “contact us” link in the top-right portion of the page, and we’ll do our very best to answer them.

You know it's important to edit your work, even if self-editing is difficult for you.  After all, you want to make your story (or article or poem) the best it can be.  But sometimes, no matter how many times you go through your writing,...

In School Levy Inequity is a Bad Idea I said: Now, Rachel Le Conte of AP is reporting at SeattlePI.Com that Washington House Lets Schools Raise More Through Levies  The Washington state House on Saturday approved a...

For more information, including a list of employers who will be present, please go to http://omaha.employmentguide.com/jobfairdetails.html?JobfairID=3270 Lincoln Works Job Fair (Employment Guide ) Wednesday, March 10, 2010 1:00pm - 5:00pm...

Here are this week’s free and inexpensive San Francisco bay area networking events and job search related happenings. (Please note you can click on event name to go to their website for further information). While many of my events are focused...

In the 1982 film ,Tootsie the protagonist is faced with the challenge of building a relationship with his true love through befriending her as her ‘girlfriend’. It works. Initially, he is an unemployed actor of 20 years when he lands the...

It would be nice to report that every mortgage payment is promptly received and correctly processed. However, it follows that in a country with some 45 million first mortgages that there are millions of opportunities to screw up and that sometimes loan payments made in good faith are not properly handled.

What can you do?

• If you pay by check, pay 10 days early.
• If the lender has a website, check the account balance each month about 10 days after the payment is due to assure your account has been credited. If not, contact the lender immediately.
• If you pay electronically with an automated payment check your account to assure that the payment was made. Protect yourself and always have an overdraft line-of-credit. This costs about $25 a year plus interest for any advances, but it’s a lot cheaper than late fees and negative credit items.
• If you paid electronically but not automatically, think of switching to an automated payment system. Be cautious however and ask what happens if you change accounts or prefer in the future not to pay electronically.
• If you want to be sure that a mortgage payment is credited to your account, send the check by certified mail with a return receipt requested.

Mortgage Paid

Late payments set off three problems.

First, you may be hit with a late fee.

Second, predatory lenders who engage in “loan-to-own” financing will be elated if you’re late. They will hit you with a late fee, perhaps raise your interest rate and possibly foreclose — even if you’re late by five minutes.

Third, your credit report can be dinged. However, credit reports only include payments which are at least 30 days late — thus the reason to check lender sites and your bank account 10 days after a payment is due.

If you’ve made your payment in a timely manner and for some reason it has not been quickly credited to your account, call the lender and complain. I’ve had lenders waive late fees by calling and pointing to my past payment history.

Technorati Tags: bank, check, checking account, electronic payment, foreclosure, late fee, lender, mortgage paid, predatory lender

Two events on the same day reminded me that the space between words is important, and can be employed in the service of subtle meaning. One was an ad from my bank, Chase, which alluded to a "Chasexperience." I can't believe that the...

1.  How much vacation time do I get? 2.  Is the company sick pay in addition to the vacation or part of the policy? 3.  When do I get my own office? 4.  How long do I get for lunch? 5.  I smoke, how many...

San Jose, CA (March 8) -- Project Inspire 2010, NVIDIA  Corporation's  annual social responsibility initiative project for the community in Silicon Valley  was launched today! Every year, NVIDIA Corporation, a provider ...

Well-meaning people often tell me, `I don’t know how you do it’ in regards to homeschooling. Here’s how I do it: I suck at it--just like with everything I have had to learn how to do. I’m not good at it (yet) or know...

Ever wonder what to do with all the old junk that you have lying around? Need some extra cash fast? Why not sell that stuff on sites like E-Bay or the Fresno Craigslist. It can give you some quick cash when you need it most. Although you probably...

Would it not be the greatest miracle if little girls grew up into perfect Jane Austen characters?  They would dress conservatively, say please and thank you, choose friends with purpose and marry who you deemed worthy.  Unfortunately, our...

First Lady Michelle Obama CBS news Last week, First Lady Michelle Obama visited Jackson, Mississippi to promote her "Lets Move" initiative.  It comes as no surprise why Mrs. Obama chose Mississippi. For the fifth straight...

Once a student has decided which college to attend in the fall, the family will pay an enrollment deposit to secure a place in the incoming freshman class. In addition, a housing deposit and an application will also be required if living on campus...

Governor Jan Brewer, AZ, warmed the heart of homeschoolers with the Home School Week Proclamation. AP Photo   Homeschool families from around Arizona convened at the State Capitol grounds in Phoenix last week for the Arizona...

  You're keeping tabs on all the job boards. You're doing all the networking to keep your name out there in the field. You're going to job fairs and meeting with prospective employers for informational interviews. But are you leveraging job recruiters...

F.M. Meredith a.k.a. Marilyn Meredith is the author of nearly thirty published novels. Under the name of F. M. Meredith she writes the Rocky Bluff P.D. crime series. No Sanctuary was a finalist in the Epic 2009 best in e-book mystery/suspense category....

Jackson Health System is facing more problems than ever. Now the Public Health Trust, which manages Jackson Health System is considering eliminating the nearly completed four story Jackson South. The PHT has already spent $102 million on the project...

"Through Hansberry's careful craftsmanship, the universal themes of the importance of dreams and the frustration of dreams deferred, the strength of family, the importance of not selling out, the problems of conflicting expectations, the...