First Time Home Buyer Credit

Many taxpayers who claimed the first time home buyer's credit are having their tax returns examined by the IRS. Turns out generally that this credit is not being properly reported. Even tax practitioners are demonstrating incompetence when it comes to preparing, signing and filing tax returns of this nature. This is becoming a real mess and professional incompetence aside the fact is that this tax credit changed from year to year and can be difficult to not only understand but to also apply. The Home buyer Credit was created by Congress in 2008 to help stimulate the housing industry by encouraging people to purchase their first homes. Subsequent legislation in 2009 and 2010 revised, extended and expanded the credit. The Home buyer Credit was a refundable credit that could result in a tax refund when the credit exceeded the tax liability, even if no income tax was withheld or paid so it facilitated fraud in all shapes and forms. Each of the laws with Home buyer Credit provisions contain different Credit amounts, qualification requirements, and repayment requirements. Individuals who received the Home buyer Credit for a home purchased in 2008 are required to pay back the total amount received for the Home buyer Credit over 15 years beginning in 2010. There are some exceptions. In addition, individuals who received the Home buyer Credit in 2008, 2009, or 2010 generally must repay the entire amount they received, if, during the 3-year period beginning on the purchase date and after the year for which the individual received the home buyer credit, they dispose of the home or it ceases to be their principal residence. If the disposition is a sale, the repayment requirement is applicable to the extent there is a gain on the sale of the home. Qualifying for the home buyer credit takes into consideration the taxpayer's marital status separately and distinctly from the taxpayer's filing status. In other words if you are married regardless if you file jointly or separately both spouses home ownership histories are taken into consideration when determining either spouse's eligibility for the credit. Many good people misunderstood this, wrongly applied for the credit, and are now experiencing the consequences. The real hurt is coming when the IRS assesses the accuracy related penalty which seems to be happening with little degree of consistency.