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IRS.gov Website
Publication 523
taxmap/pubs/p523-009.htm#en_us_publink1000266744

Recapture of First-Time Homebuyer Credit(p29)

rule
taxmap/pubs/p523-009.htm#en_us_publink1000267527

Recapture of 2008 first-time homebuyer credit.(p29)

rule
If you claimed the first-time homebuyer credit for a home you purchased in 2008, you may have to recapture all or a portion of the amount you claimed. For a home purchased in 2008, you must repay the first-time homebuyer credit over a period of 15 years, starting in 2010. If your home ceases to be your main home before by the end of the 15-year period, you must include all remaining annual installments as additional tax on the tax return for that year. Your home ceases to be your main home if you sell the home, convert the home to business or rental property use, or the home is destroyed, condemned, or disposed of under the threat of condemnation. In the event of a sale or other conversion you will need to file Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, with your tax return. In the case of the sale of the principal residence to a person who is not related to the taxpayer, the recapture shall not exceed the amount of gain, if any, on such sale. Solely for purposes of figuring this gain limitation, reduce the basis by the amount of the credit that has not been repaid.
taxmap/pubs/p523-009.htm#en_us_publink1000240728
Example.(p29)
Dan and Kareema Love received $7,500 under the first-time homebuyer credit. They purchased the home on October 14, 2008, for $200,000. In 2009, they made improvements to the home that increased their basis by $1,000 to $201,000. They sold the home on November 3, 2011, for $198,000 to an unrelated person. Solely for purposes of figuring the gain limitation on how much of the first-time homebuyer credit they must repay, the adjusted basis of the home is $192,500 ($200,000 - $7,500 + $500). This amount is the original purchase price minus the unrecaptured portion of the credit plus the amount recaptured on their 2010 tax return. Dan and Kareema would have to accelerate the recapture of the $7,000 and repay the entire amount by adding it to their income tax liability for 2011.
EIC
Adjusted basis is reduced by the amount of the unrecaptured first-time homebuyer credit only for purposes of figuring how much of the credit must be recaptured. Do not use this basis for figuring gain or for reporting basis or gain on Schedule D (Form 1040) or Form 8949.
taxmap/pubs/p523-009.htm#en_us_publink1000240729

Exceptions.(p29)

rule
If one of the following applies, you do not have to recapture the 2008 first-time homebuyer credit.
Deposit
For details on claiming and repaying or recapturing the credit, see Form 5405 and its instructions.
taxmap/pubs/p523-009.htm#en_us_publink1000252190

Recapture of the 2009 or 2010 first-time homebuyer credit.(p29)

rule
If you claimed the first-time homebuyer credit for a home you purchased in 2009 or 2010, the credit is not required to be repaid unless your home ceases to be your main home within 36 months of the date of purchase. If you sell the home to someone who is not related to you, the repayment in the year of sale is limited to the amount of gain on the sale. Solely for purposes of figuring the gain limitation, reduce the adjusted basis by the amount of the credit. See the Instructions for Form 5405 for additional information.
taxmap/pubs/p523-009.htm#en_us_publink1000254540
Exception.(p29)
Members of the uniformed services or Foreign Service and employees of the intelligence community do not have to repay the credit, if you sell the home or the home ceases to be your main home because you received Government orders to serve on qualified official extended duty.
For more information and assistance, see IRS.gov and click on "Tools" to access the "First-Time Homebuyer Credit Account Look-up Tool."