$8000 Tax Credit Revisited 2012

By
Real Estate Agent with Team Price Real Estate ~ Partner
http://actvra.in/xq6

Remember the home buyers tax credit craze of 2008, 2009, 2010? I do and it's time to take a refresher course.

That's right it's time to get back up to speed on the rules. Why? Well, as you may recall there were all kind of rules around getting the $8000 tax credit. We are now approaching the time limits on being able to sell those homes and the owner  not having to repay the $8000 tax credit if they use phase II or III.

I am not a tax accountant or tax attorney. If you used one of the various tax credit be sure to consult with your tax accountant or tax attorney so you know exactly how this may/will affect your tax return.

There were three (3) phases of the tax credits that buyers may have used. With the passage of time, I am now starting to get questions about how these rules impact selling these homes.

Phase I was in 2008. The basics were; First-time home buyers who purchased new homes in 2008, subject to certain criteria, were eligible for a maximum credit of $7,500, which must be repaid over a 15-year period. Essentially this was an interest free loan for 15 years. If you sell your home before the repayment is complete you are responsible for repaying the balance in the same year that you close the sale of your home. The theory was that if you lived in the home for several years the value of your home would rise more than enough to cover this tax liability. I must say I was a little skeptical of this at the time it was unfolding. I counseled several first time buyers, back then, about the long term of the loan and the consequence of selling in just a few years.

Phase II was in 2009. The basics were; First-time home buyers who purchased new homes in 2009, subject to certain criteria, were eligible for a maximum credit of $8,000, which does not have to be repaid. There is a restriction on the last part of that sentence, which does not have to be repaid. The buyer must live in the home for residential purposes and not resell for three (3) years. This particular restriction is why I am writing this blog. We are at the beginning of the three (3) year waiting period thus starting the release from the repayment clause. This will continue to unfold throughout the year.

Phase III was also in 2009. The basics were;  Long-time residents who purchased homes after November 6, 2009, subject to certain criteria, were eligible for a maximum credit of $6,500, which does not have to be repaid. Again the three (3) year restriction applies regarding reselling a home bought and claiming the $6500 tax credit.

Here is a recap of this repayment requirement for phase 2 & 3: If, within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full amount of the credit is due at the time the income tax return for the year the home ceased to be your principal residence is due. The full amount of the credit is reflected as additional tax on that year's tax return. Form 5405 and its instructions will be revised for tax year 2009 to include information about repayment of the credit.

Remember to consult your accountant or tax attorney. I am not either of those thus this is not intended to be tax advise.

Bill Austin ~ Serving the Austin TX Metro and surrounding counties.

Care ~ Communication ~ Experience ~ Call ~ Text ~ Email

512-709-6343 ~ bill@teamprice.com

Team Price Real Estate ~ D. Price Broker

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Peggy James 04/17/2012 03:38 AM
Topic:
Home Selling
Tags:
reselling a home bought with the tax credits

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Rainmaker
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Patrick White
Home Driven Realty, Inc - Baldwin, NY
Put our 28 years experience and technolgy to work

Good Morning Bill

It would be a good idea to spur the market. Have a great week.

Mar 18, 2012 08:01 AM #1
Rainmaker
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Mike Carlier
Lakeville, MN
More opinions than you want to hear about.

Bill, I actually read your post and think you did a great job summarizing the credits and their differences.  In retrospect, it seems that the credits served to increase the demand for housing, and subsequently the selling prices, probably in an amount at least as much as the rebates. 

Mar 18, 2012 08:15 AM #2
Rainmaker
98,257
Morris "Bill" Austin
Team Price Real Estate ~ Partner - Dripping Springs, TX
Text, Email, Call and I will respond quickly!

Patrick,

Thanks for stopping by my blog! I think it did serve it's purpose when it was done. I think the Phase I folks may still get hurt over time. I do know some people wanted to or needed to sell before the time line had been met in their particular case and therefore could not sell.

E.J,

Thanks for stopping by my blog! I hope it works out for everyone. I am afraid that many, especially in Phase I, didn't understand the long timeline and that they may actually owe money back.

Bill

Mar 18, 2012 09:53 AM #3
Rainmaker
418,957
Peggy James
EXIT Realty Associates - Woodbridge, VA
Lake Ridge Virginia Real Estate Specialist

Hi Bill, love you post. I am going to re-blog.

Apr 17, 2012 03:27 AM #4
Rainmaker
98,257
Morris "Bill" Austin
Team Price Real Estate ~ Partner - Dripping Springs, TX
Text, Email, Call and I will respond quickly!

Peggy,

Glad you liked it and I hope it helped refreshed you with some of the details that will eventually unwind this program. I feel sorry for those that are tied to this for 15 years.Does htis go back to the old saying...when something looks to good to be true it may not be true.

Bill

Apr 17, 2012 07:43 AM #5
Anonymous
Lekeya

Bill I really enjoyed your blog, but I was wondering will there be a tax credit for home-buyers for 2012.

 

Nov 11, 2012 07:51 PM #6
Anonymous
Anonymous

Lekeya,

The TAX credit is something that Congress has to authorize within a budget and as you probably know President Obama has not  had a budget passed since he's been in office. The House of Representatives (republican controled) has submitted budgets every year.  The Senate (democrat controlled) will not even take a budget to the floor for debate. I can only assume that this is in coordination with the President, maybe not.

With that said, there are programs for down payment assistance and a tax credit programs available. If you are in the central Texas area give me a call I'd be glad to help you utilize these type resources to purchase a home. Right now, with interest rates as low as they are, in many cases it's less expensive to buy a home than it is to rent.

Bill Austin ~ 512-709-6343 ~ bill@teamprice.com

 

Nov 12, 2012 06:23 AM #7
Rainmaker
654,349
Joetta Fort
The DiGiorgio Group - Arvada, CO
Independent Broker, Homes Denver to Boulder

Bill - I met with a prospective seller last night, who asked me if I thought the fact that the 3-year period for all those credits is coming up will result in a lot of homes going up for sale.  I hadn't even thought of that, so I wanted to see what other Rainers are saying, and I found your post.  This is good, and I suggested it for a feature.

I'll also be writing a post and linking to yours.

What do you think about their question - do you expect to see more homes coming on the market as a result of that deadline expiring?

Jan 11, 2013 11:20 AM #8
Anonymous
Morris Austin

Joetta,

I've had this issue come up aver teh last year or so when folks were considering selling. When I brought up the tax creadit they decided to wait or lease the home until the time constraint passd.

Bill

Jan 11, 2013 02:28 PM #9
Rainmaker
654,349
Joetta Fort
The DiGiorgio Group - Arvada, CO
Independent Broker, Homes Denver to Boulder

I did write that post with a link to your post.  I've linked to it here in case you want to read it.  But I also want to tell you, I did some research to prepare for the post, and your blog post came up very high in every search.  So, congratulations on the great idea for writing a post on this subject!    

Jan 12, 2013 08:18 AM #10
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Rainmaker
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Morris "Bill" Austin

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