How long does it approximately take to gain credit?

Gain on Sale for First Time Tax Credit?

• Hi everyone, We're selling our house two years after we claimed the first time home-buyer tax credit. Taking the credit at face value, you are required to repay the credit if you sell your house before three years. I did a little digging and found out that if you take a loss versus the houses basis then repayment is not required. Going off of IRS Publication 523, improvements made to the house increases your homes adjusted basis. In our scenerio, we purchased the home for $60,000 and put roughly $15,000 into it in improvement (remodeled kitchen, bathroom, floors). Now that would increase the adjusted basis to $75,000 correct? Now according to the IRS documentation, to calculate your gain or loss, you take the homes basis and subtract the tax credit. If the sale price is more then then pay the difference or up to the original claimed tax credit (gain on sale). In our situation, our basis value would be $69,000 ($75,000 - $6000 tax credit claimed) and since we sold the house for $60,000, that would be considered a $9,000 loss correct?

• Answer:

  There's a worksheet in the 5405 instructions. You paid $60K. That means your credit was $6000 or a net of $54,000. Add in your improvements of 15,000 and your basis (for this calculation only) is $69,000. If you sold for $60K, you do not owe the credit back. (You are correct). The loss on the house is not deductible. In fact you shouldn't even get a 1099-S when you sell. (If you do get the 1099-S, show the sale with $0 gain/loss on your taxes.) The above assume you did NOT use the house for rental or business purposes of any kind.