I took advantage of the $7,500 First Time Homebuyer Tax Credit in 2008. If I rent the house, what ha
Chris Asked: I took advantage of the $7,500 First Time Homebuyer Tax Credit in 2008. If I rent the house, what ha
Here is the deal:
I took advantage of the $7,500 First Time Homebuyer Tax Credit in 2008.
This was not the $8k Credit that came in 2009. The 2009 credit is not a loan.
My Tax Credit is a $7,500 loan, set to be repaid in $500 installments over a 15 year period.
So here is where things spiral into a possible disaster for me:
I made the first $500 payment while filing my 2010 Taxes in February. I owe $7,000. The rules of this credit state that the IRS can bill me for the ENTIRE AMOUNT DUE if I change my address. (In other words, If the property I received the credit on is no longer owner occupied or sold)
Well, I purchased my home three years ago. I owe 145k. It is worth 115k. I can rent it for a straight across break even amount, which would cover the Mortgage, Taxes, Insurance, and Property Management fees. That is where my luck ends.
I live in the Central Valley of California. Unemployment is straddling 20 percent, and work is scarce. My construction job involves me driving up to 200 miles per day for work (When there is work) , and the car repair costs are crushing me. I have the option to move asap, or file for bankruptcy in the next few months. Right now, my credit is flawless, other than the mounting debt I am incurring every day I stay here…and I will default If I do not leave. Its just a matter of time…
So my question is (In a nutshell), is the IRS going to demand $7,000 from me when I move, or do they have provisions for a situation like this? I cannot be the only one facing this problem!
Answers:
If the home fails to remain your primary residence at any time during the 15 years, the remainder of the loan is due back to the IRS on your taxes for that year (and you'll want to make monthly installments if it's over 1k because otherwise you'll have penalties).
I also received the 2008 homebuyers credit and sold my house this past February… and paid the full amount back.I didn't like it, but it was only a loan and I agreed to the terms, so I paid it back with money from my savings.If you can't pay it back, it just becomes tax debt and you can set up a payment plan with the IRS – you'll pay interest and penalties, and a fee for the payment plan… but, they'll spread the repayment out (which may be a lot more feasible for you then paying the entire 7k back immediately).
You absolutely have to get advice from a professional before things get any more complicated.
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