Louisville Short Sale Expert: Helping You Avoid Foreclosure

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Do Sellers in Foreclosure Have to Repay The $8,000 Tax Credit?

October 11th, 2011 |

Author: admin

Do Sellers in Foreclosure Have to Repay The $8,000 Tax Credit?

By David Halpern, Louisville Short Sale Expert, (502) 664-7827 or 895-3100

Sadly, some houses purchased with the $8,000 tax credit are now starting to head to short sale and foreclosure. Sellers are concerned they have to repay the $8,000 tax credit.

Sellers should seek an authoritative opinion from a tax attorney or CPA. I am a Realtor and not a professional tax advisor. The information here is general information provided to help sellers understand questions to ask a lawyer or CPA.

This is Part 2 of a 2-part series. See Part 1 at $8,000 Tax Credit Homes Are Starting To Fall Into Foreclosure and Short Sale.

What is the $8,000 Tax Credit and Does It Have To Be Repaid?

In 2009 and 2010 the government gave first time buyers an $8,000 tax credit upon purchase of a home. The money did not have to be repaid if the homeowner retained ownership of the house and continued to reside in the home for three years. Additional Information can be read here: First-Time Homebuyer Credit Questions and Answers: Homes Purchased in 2009 or 2010.

If the new owners sell the house within the first 3 years, there are guidelines that determine if they have to stroke a check back to the government. IRS Form 5405 is used to determine if the credit needs to be refunded. Again, always use a professional tax advisor to interpret all IRS forms and guidelines.

Here Are Excerpts of the IRS Form 5405

Notice that when the house sells, even if through foreclosure, there is a chance that the seller may have to repay the $8,000. It depends if the house was sold at a gain.

Homeowners in a financial bind who need to sell their house to avoid foreclosure should always seek a Realtor who specializes in pre-foreclosure short sales. A true professional short sale Realtor always strives to stay current on rules and regulations. Imagine selling your house and unexpectedly getting stung with an $8,000 tax bill.

If in the Louisville, KY area, please call me at any time at (502) 664-7827.

Submit Your Information Now or Call Us at (502) 664-7827

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Posted in Behind on Payments, CPA, Foreclosure, IRS Form 5404, Tax Attorney, Tax Credit |

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