Tax Tip for First-Time Homebuyers

If you bought a home in 2008 remember that the IRS no longer mails reminder letters to taxpayers who have to repay the First-Time Homebuyer Credit.  However the IRS does have a tool on their website that helps those who claimed the First-Time Homebuyer Credit and are in the process of repaying the credit.

You can find the First-Time Homebuyer Credit Lookup tool at IRS.gov under the ‘Tools’ menu. You will need your Social Security number, date of birth and complete address to use the tool. If you claimed the credit on a joint return, each spouse should use the tool to get their share of the account information. That’s because the law treats each spouse as having claimed half of the credit for repayment purposes.

The tool provides important account information  such as the original amount of the credit, annual repayment amounts, total amount paid and the remaining balance. You can print your account page to share with your tax preparer and to keep for your records.

In order to repay the First-Time Homebuyer Credit,  you have to add the amount you repay to any other tax you owe on your federal tax return .  Generally this results in additional tax owed or a reduced refund. There are two ways that you can report the repayment of credit.  The first way you can report the repayment is on line 59b on Form 1040, U.S. Individual Income Tax Return. The other way is if you are repaying the credit because the home stopped being your main home, you must attach Form 5405, Repayment of the First-Time Homebuyer Credit, to your tax return.