According to some Federal Laws instituted during the 2008-2013 financial crisis run, there were two basic tax credits for first-time homebuyers to stimulate home purchases:
- First time homebuyers were offered a $7,500 (married) or $3,750 (single) “refundable” (meaning under certain situations it was to be paid back to the US Treasury in the form of $500/year lower income tax refund or increased payment due) tax credit or 10% of purchase price, whichever was lower. This applied to home purchases between April 9, 2008 and July 1, 2009 (where a purchase contract was signed prior to April 9. 2008).
- Since the first home buyer stimulus wasn’t very effective in generating new home sales, another $8,000 (if married and $4,000 if single) “nonrefundable” (it didn’t have to be paid back to the US Treasury) tax credit was established that waived (eliminated any possibility of recapture or payback to the US government). This applied to home purchases between December 31, 2008 and December 1, 2009.
SNAFU!
Source: Treasury Identifies Confusion in IRS Handling of Homebuyer Tax Credits.
Do you think the IRS has improved since 2010?
The Treasury Inspector General for Tax Administration (TIGTA) found in 2010 that the IRS did not have the ability to identify individuals who received a credit and later ceased using the home as their primary residence.
Do you think they do now?
Do you think they recovered all the false credit applications? No – I don’t either.
TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION Report in 2012 – During Tax Years 2006 through 2009, taxpayers claimed almost $470 billion in refundable credits. Due to post-refund examinations, taxpayers were required to repay more than an estimated erroneous refundable credits, the IRS plans to require them to repay more than an estimated $2.3 billion in erroneous credits. By the end of December 2011, the IRS had recovered an estimated $1.3 billion—-. While most of these weren’t for homebuyer tax credit, there were recommendations made in this report to require “proof of purchase” and not just taxpayer word.
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