Repayment Of Homebuyer Credit
If you purchased a home between April 8, 2008 and May 1, 2010, you may have taken advantage of the first-time federal homebuyer tax credit. Repayment of this credit is typically required (with some exceptions), so it is important to understand the repayment terms and situations that could accelerate your repayment period.
The typical agreement for repaying the federal homebuyer credit requires you to repay the credit in equal payments over 15 years, with no interest charges. This is done by attaching a completed Form 5405 to your tax return annually, starting from the second tax year after you receive the credit. This means an increase in the annual income tax is owed.
It is also important to note that first-time homebuyer credit repayment terms vary depending on the year you purchased your home.
For homes purchased in 2008, you usually must pay the credit over 15 years. To do this, homebuyers are required to increase their Federal income taxes for each taxable year in the 15-year repayment period.
However, there are exceptions to this process that can accelerate the repayment period significantly — such as, your home stops being your principal home — or potentially excuse you from having to repay the full credit.
To learn more about your first-time homebuyer tax credit repayment options, visit the IRS website.
If you are looking to purchase a home, unfortunately the first-time homebuyer tax credit is no longer available. However, that doesn’t mean you can’t find a great deal on your home.
Our First Bank* experts are ready to help you become a homeowner and walk you through the process step-by-step, from calculating your budget to considering home warranties to starting your loan application.** Find a First Bank loan officer to get started today!
*Member FDIC. First Bank and its representatives do not provide tax advice. Each individual’s tax and financial situation is unique. Individuals should consult their tax advisor for advice and information concerning their particular situation.
**Loans subject to credit approval. Equal Housing Lender. NMLS #474504