Selling your home if you participated in a tax credit program.

I like to post general answers when a question becomes reoccurring because I know a lot of you may need an answer! This said, I am not a licensed accountant and am not giving tax advice, neither is David Dikeman providing the examples below.  We are just sharing some general examples for you to get an idea of how the tax credit works if you need to sell your home sooner than 3 years has passed. 

One of the best lenders I know had the following examples for me: 

 A question being ask by those that participated in the tax credit programs.......

 "If I purchased a house at the end of 2009 and I want to sell the house today, do I have to pay back the tax credit that I received in 2009?" 

After checking with two different CPAs. The first answer is "Yes." The IRS rule states that if you sell a house within three years (36 months), you have to pay back the tax credit - BUT - it depends on how much you make from the sale of the home.

Rather than explain in words, let's explain by example: 

Example 1

I buy a house for $200K at the end of 2009

 - I received an $8K tax credit, so my cost is effectively $192K

 - I sell the house in the beginning of 2012 for $201K, but it costs me 8% to sell (8% = $16K)

 - My net proceeds are $201K-$16K= $185K

 - $185K-$192K = $7K loss. Since I lost $7K, I don't have to pay back the $8K tax credit  even though it's been less than three years.

The seller would have to file form 5405 with their tax return, the form would walk them through the calculations, but there would be no repayment based on those circumstances.

Example 2

If I bought at the effective price of $192K (like above), I sold it for $212K, had the same $16K cost to sell, and netted $4K after expenses, I'd have to pay $4K of the tax credit back.

Example 3

If I bought at the effective price of $192K (like above),  I sold it for $218K, had the same $16K cost to sell, and netted $10K after expenses, I'd have to pay all $8K of the tax credit back.

Having said all this, Amy Bumpus, nor myself are licensed accountants. This is just for you to have an idea of what it means to sell your home after participating in the tax credit program. SO, YOU NEED TO CHECK WITH YOUR OWN TAX ADVISOR! Everybody's tax situation is different and only a licensed CPA or Tax Advisor can provide you with individual tax advice!

Of course, if you are going to purchase a new home, please give us a call to help you buy and finance your new home! We can certainly use the business, and we'll do a great job helping you from your search through the closing!

David Dikeman

Home Mortgage Consultant

Insight Bank

614-807-3891 Direct

614-330-7999 Cell

614-431-9410 Fax

8760 Orion Place, #100

Columbus,OH 43240

 IF YOU HAVE QUESTIONS ABOUT SHORT SALES OR JUST ABOUT SELLING YOUR HOME OR BUYING A NEW ONE, DON'T HESITATE TO CALL, TEXT OR EMAIL ME. 614-657-2005

My promise to my clients: I try to always remember what it is like to walk into this incredibly complex world of buying and selling with little or no knowledge of how the process works. I know that behind the door of your home and in your life there is much more going on than just your real estate transaction. I work with each person, not the house, and with the whole person, not just the issues surrounding the transaction. When I attempt to put myself in your shoes and contemplate what you are dealing with I am most effective.

The Benadum Team

Amy Bumpus

Straight Talk—Always