Repayment of 2008 homebuyer tax credit begins this year

  • Published
  • By Capt. Bradley Mumford and Betty Spealman
  • 366th Fighter Wing staff judge advocate
MOUNTAIN HOME AIR FORCE BASE, Idaho --  Did you take advantage of the Homebuyer Tax Credit for a home purchased between April 9 and Dec. 31, 2008? Homebuyers who met program requirements could qualify for up to a $7,500 tax credit on their 2008 tax return.

If you were among the many people who took advantage of this credit, hopefully you read the fine print. If you did, you are aware that the 2008 Homebuyer Tax Credit was really an interest free federal loan that must be paid back.

The repayment of those loans begins with your 2010 tax return. When you signed up for the credit in 2008, you agreed to repay the money on your federal tax return in equal installments over the next 15 years.

So, for example, if you claimed the maximum available credit of $7,500 on your 2008 federal income tax return you must begin repaying the credit by including one-fifteenth of this amount, or $500, as an additional tax on your 2010 return.

However, some exceptions apply to the repayment rule. They include:

· If you pass away, any remaining annual installments are not due. If you filed a joint return claiming the 2008 credit and you pass away, your surviving spouse is still required to repay his or her half of the remaining repayment amount.

· If you stop using the home as your main home, all remaining annual installments become due on the return for the year that happens. This includes situations where the main home becomes a vacation home or is converted to business or rental property.

· There are special rules for involuntary conversions. An involuntary conversion occurs when your property is destroyed, stolen, condemned or disposed of under the threat of condemnation and you receive other property or money in payment, such as insurance or a condemnation award.

· If you sell your home, all remaining annual installments become due on the return for the year of sale. The repayment is limited to the amount of gain on the sale, if the home is sold to an unrelated taxpayer. If there is no gain or if there is a loss on the sale, the remaining annual installments may be reduced or even eliminated.

· If you transfer your home to your spouse -- or as part of a divorce settlement to your former spouse -- that person is responsible for making all subsequent installment payments.

In any of these situations, taxpayers are urged to consult a professional to determine the tax consequences of a sale or an involuntary conversion. The MHAFB legal office offers tax advice and assistance to military members, their families, and retirees at no charge.

The tax center is open from 8 a.m. to 2 p.m. for walk-ins on Monday and Friday, retiree appointments on Tuesday and complicated returns on Thursday. Appointments are for individuals with more complicated returns - those who plan to itemize deductions, have investment income or have a rental property. The tax center is located in building 2607, the same building that houses the Envision store. For more information or to schedule an appointment, call 828-1081.