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IRS GUIDANCE ON HOMEBUYER CREDIT
September 17, 2008
The IRS has released its first guidance on the new credit for "first time" homebuyers. It notes that the credit really operates like an interest-free loan, as it must be repaid over 15 years:
The first-time homebuyer credit is similar to a 15-year interest-free loan. Normally, it is repaid in 15 equal annual installments beginning with the second tax year after the year the credit is claimed. The repayment amount is included as an additional tax on the taxpayer’s income tax return for that year. For example, if you properly claim a $7,500 first-time homebuyer credit on your 2008 return, you will begin paying it back on your 2010 tax return. Normally, $500 will be due each year from 2010 to 2024.You may need to adjust your withholding or make quarterly estimated tax payments to ensure you are not under-withheld.
As surely as a Senator will crow at the sunrise (and take credit for it), we will start hearing sad stories of taxpayers who have trouble repaying their credit starting sometime in 2010 or 2011. No doubt some congresscritter will want to demonstrate his compassion using our money by forgiving the loan repayments.
Related: IRS: LENDER OF FIRST RESORT
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