How does this First Home Buyers Credit work?
Actually, a lot of taxpayers think that this First Time Home Buyers Credit is their's to keep, that is it is a permanent tax credit.
The reality is that this tax crdit is more like a interest-free loan. The IRS states that "two years after a taxpayers claims this credit, the taxpayer has to start paying it back. This payback is over a period of 15 years in 15 equal installments.
This means that in the event a taxpayer qualified for the full tax credit of $7,500, that taxpayer would owe an extra $500 on their tax return each year for 15 years!
In the event that the taxpayer were to sell his or her home for a profit, then that taxpayer would have to pay back the rest of the tax credit from any profit earned on the sale of the home.
In the event that the taxpayer were to sell his or her home for a loss, then that taxpayer is off the hook, and would not have to pay the rest back tax credit upon the sale of the home.