Saturday, February 05, 2011

Give a credit, Take some credit

Can you remember back to a time when many were excited to utilize the first time home-buyer credit to save money on their taxes?

Well the party is over for many since the 2 year grace period for repayment of qualified home purchases has ended. Many taxpayers are now wondering how they will pay for the credit that is now being taken back.

The short answer is it depends on when the house was purchased and if the taxpayer is still living in the home or not. The IRS will be sending three different notices to taxpayers depending on what your home status is:

• CPO3a – will be sent to taxpayers who purchased a qualified home in 2008 and who begin repaying the credit with your 2010 tax return.

• CPO3b – will be sent to taxpayers who purchased homes in 2009 and early 2010 reminding them of the repayment rule and the ramifications if they sell the home or change the use.

• CPO3c – will be sent to taxpayers whose principal residence is not currently the residence that they claimed the credit for.

Be sure to keep a close eye out for the IRS notices in your mailbox.

The Tech Accountant

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