I want to sell my Olathe Home that I bought with the home buyer tax credit. How can I escape paying the penalty?

I want to sell my Olathe Home that I bought with the home buyer tax credit. How can I escape paying the penalty?

Question: I qualified for the first time homebuyer’s credit of $8,000 when I purchased my Olathe home on June 14th, 2009. I am now getting married and we really want to buy a bigger house. Is there anything we can do before June 14th, 2012 that would not cause us to have to pay the $8,000 back? Should we consider renting the house out?
- Tim S. from Olathe, KS.

Answere: One of the requirements of getting the 2009 – 2010 Homebuyer Tax Credit is that you have to maintain your home as a primary residence for 36 months. As a primary residence does not cover renting your Olathe, home. So if you move out of your home and take up residence somewhere else — even if you still own the home — you’ll have to repay part of the tax credit you received when you bought your Olathe home. 

Additionally, if you sell your home you have to pay back the credit.

The good news is that you only have to repay up to the home’s gain, so you may not have to repay the entire tax credit. There are some exceptions to the requirement to repay the credit immediately on your next tax return:

• If the spouse of a deceased homeowner continues to live in the house. If the spouse sells the home, though, before the time is up he or she must repay half the credit.
• Spouse remains in home to finish the 36 months after a divorce.
• Military or other personnel required to move more than 50 miles away.
• If your home is involuntarily damaged and you are forced to move. However, you have to buy a new home within two years.

Have any other questions, or we can help you with your real estate needs, feel free to contact the Dowell Taggart Team.

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Blog post written by the Dowell Taggart Team of RE/MAX Premier Realty 

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