Do you have to repay the $8,000 home buyers tax credit?

Two years ago you bought a Spring Texas home. In return for buying a home, our government gave you an $8,000 tax credit.  It was a sweet deal!!

Today you just found out your employer is moving its corporate office.  Your 10 minute drive to work will turn into 50 minutes. You want to sell your Spring Texas home and move because a 50 minute commute to work will drive you insane. The only thing holding you back from listing your house is you would have to repay the $8,000 tax credit since you haven’t lived in the home for 36 months.

first-time-home-buyer-tax-creditIf you sold the home, you have to repay the entire $8,000 tax credit if:

1. the home ceased to be your primary residence within 36 months after the date you purchased it

AND

2. you sold the home for a gain of $8,000 or more. The sale must be made to a person unrelated to you.

To calculate the loss or gain on the sale of your house: 

1. Calculate Net Sales Price.  Sales Price – commissions / Realtor fees – advertising expenses – legal expenses = Net Sales Price

2. Calculate Adjusted Basis. Purchase Price + legal fees + recording fees + survey fees + owners title insurance, if paid by you + cost of additions or improvements = Adjusted Basis of home

Loss or Gain on the sale of your house = Net Sales Price – Adjusted Basis of home

If your gain was less than or equal to $8,000, you would owe the IRS the entire amount of the gain.  If the gain was more than $8,000, you would owe the IRS $8,000.

If you sold your Spring Texas house for a loss, you would NOT have to repay any of the $8,000 tax credit.

I admit it’s a tad bit complicated. It wouldn’t be an IRS rule if it wasn’t.  Contact your tax accountant and seek guidance as you may be able to move without having to repay the $8,000 tax credit.