Nearly Half Must Return Homebuyer Tax Credit To IRS

Approximately 1.8 million taxpayers claimed a total of almost $12.5 billion in first-time homebuyer credits in 2009. More than 950,000 taxpayers will be required to repay the credits because their homes were purchased in 2008. Many more may have to repay the credits if the homes cease to be the primary residences of the taxpayers within 36 months. The IRS has taken several important steps to enforce the repayment requirements in the law, according to the report just issued from Treasury’s Inspector General for Tax Administration, or TIGTA.

Taxpayers who claimed the credit for homes purchased in 2008 will be required to repay it in 15 equal installments, beginning when they file their 2010 income tax return. That will apply to about 950,000 taxpayers, TIGTA said. For homes purchased in 2009 and 2010, repayment is required if the home is sold within 36 months of the date of purchase by the taxpayer claiming the credit, provided there is a gain on the sale.

The report said the IRS “is developing a comprehensive strategy” to ensure that amounts owed the Treasury are repaid. Nevertheless, “currently, the IRS does not have the ability to identify individuals who received the Credit and their purchased homes cease to be their main residences,” the report said. More than 2.6 million have claimed the first-time home-buyer tax credit since it was enacted in July 2008, for a total of $19 billion in tax breaks.