When would the IRS first time home buyer tax credit be owed back to the IRS?
My wife and I started to purchase a home in 2010 under a bond for title (owner financed) purchase style and got the first time home buyer tax credit for $8,000. After two year we have opted not to buy the home after an inspection showed several things that would prevent us from getting a satisfactory loan, so as of May 1st we will switch from owner/buyers to renters. Will my wife and I have to pay back the loan, or will we be alright if we stay in the house one more year, even if we are are doing so as renters? If we were to move early would we owe a pro-rated amount, or the full $8000?
Any help would be greatly appreciated!
The IRS site is extremely vague on "rent to own" guidelines in this situation. It sounds like as long as we live in the house 3 years (even if the last year we are considered renters) we would not have to pay it back, but if we sell or move we would.
Thanks for all the answers.
- Anonymous8 years ago
It sounds like you had a lease with an option to buy. Sadly, lease option and lease purchase contracts are NOT considered to be bona fide sales and do NOT qualify a buyer for the First Time Home Buyer Tax Credit of $8,000. Therefore, you should not have received the first-time home buyer tax credit in the first place. If this is the case you have committed tax fraud and should immediately pay back the money regardless....fines and penalties will come later.
If you had actually purchased this home and it is yours then yes, you will have to pay back the rebate in full when you file your taxes next April. However, you said you "opted not to buy". This leads one to believe you indeed had a lease with an option to buy because in a bona fide home purchase there are no such options.
- Anonymous8 years ago
You will owe the entire $8000 back. And if you get the bright idea that you will wait until the IRS catches you, you can add another 20-75% to the total. 20% if it's classified as an accuracy error, 75% if it's classified as intentional fraud.
The IRS is learning to audit these things closely. When your owner-financed property is closed out on the seller's taxes, they will figure it out. Your lender will list the property as a rental on his taxes. Renters cannot claim to own the home.
- 8 years ago
You owe the entirety of the amount back, as you did not own the home and reside there for 3 years. The FULL amount, nto prorated.
- acmeravenLv 78 years ago
Go to IRS.GOV and read the 5405 instructions carefully. If the home ceases being your main home then the whole 8k is to be repaid to the IRS.