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What are my options? Trying to sell home.

Details of our situation...
Married in 2008 - filing taxes jointly since

Purchased our first home in 2008
Home is in my name ONLY, wife is not on the mortgage.
Received FIRST TIME HOMEBUYERS CREDIT ($7,500) -- This is the credit that has to be re-payed $500 for the next 15 years.  This happened a month before they changed the law to "stay in home for 3 years, no repayment"  We have been making payments for 2 years on that repayment, it is split in our file because it is jointly.  $3,250 a piece left.

We currently have our house on the market, which has been on the market for 5 months.  We have had a few lookers, no offers, and no sign of movement.

We are desperate to move on building our new home, but have since found out that if we move out of our current home, then the IRS will make us make the $6,500 payment in FULL that tax year.  Which is something we aren't in a position to do.  We recently went through a breaking on the home, and are both teachers, which lends our house to the usual vandalism.  Again desperate to get out of our home, as soon as possible.

If the new home is just in my wifes name, which it will be, can I continue to try and sell this home, without the IRS requirement to pay the 6500 in full.  Anyone who has had a similar situation would be greatly appreciated.




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July 22 2012 - US
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Answers (4)

Best Answer
I think your best bet would be to work with a highly qualified CPA. This is a complex situation and you would hate to make it worse by getting on the wrong side of the IRS. Good luck to you.
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July 23 2012
Profile picture for Best Miami Beach
You would be well served to discuss this item with an accountant. In terms of realtor advice, we are ill equipped to advise.
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July 23 2012
Profile picture for user8694477

Q. When does my home stop being my main home?

A. Your home stops being your main home when:

  • You sell the home.
  • You transfer the home to a spouse or former spouse in a divorce settlement.
  • You convert the entire home to a rental or business property.
  • You converted the home to a vacation or second home.
  • You no longer live in the home for the greater number of nights in a year.
  • Your home is destroyed or condemned.
  • You lose your home in foreclosure.
  • You die.
There are certain exceptions, but generally, if the home is no longer your main home. you must repay the entire remaining part of the credit on your next tax return. The IRS calls this "acceleration of recapture."
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July 22 2012
Profile picture for user8694477
Here are the details from the IRS website.

You purchased your home in 2008

In the fall of 2010 or the first year after you claim the credit, you may have received a Notice CP03A, Repaying your First-Time Homebuyer Credit. This notice listed the amount of the credit you received and the amount you have to repay as additional tax. This notice will no longer be available. Effective Jan. 18, 2012, the First Time Homebuyer Look-up Tool is available to all taxpayers that received the first-time homebuyer credit (FTHBC). This tool will provide your FTHBC account information: the year your home was purchased, the amount of the FTHBC you received, your annual installment repayment amount and your FTHBC balance.

You add the amount you have to repay to any other tax you owe on your federal tax return. This could result in an additional tax owed or a reduced refund. To repay the credit, you must attach a completed Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, to your federal tax return. For example, if you bought a home in 2008 and claimed the maximum credit of $7,500, the repayment amount is $500 per year. If you stop using the home as your main home, generally you must repay the entire remaining amount of the credit for the year the home is no longer your main home. There are some exceptions to this rule.

You will need to access your account information every year to know the correct amount of your repayment that you need to add as an increase in tax to your tax return and to know the remaining amount of the credit you must repay. You can continue accessing your account information until you repay the credit in full, you sell your home, or the home no longer is your main home and you report the sale or other disposition on a completed Form 5405 attached to your tax return.

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July 22 2012
 
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