1. Does the tax credit have to be repaid? What are the terms of repayment?
2. When do I make the payment?
3. Will the IRS put a lien on my property for the amount of the credit?
4. What if I sell my house before the 15-year repayment period is complete?
5. Why must the money be repaid?

ADDITIONAL INFORMATION

• Tax Credit Basics
• Practical Questions

1. Does the tax credit have to be repaid? What are the terms of repayment?
   Yes, the tax credit must be repaid. The credit amount is repaid in increments of 6.67% of the credit amount over 15 years. For individuals who take the full $7,500 credit, the repayment will be about $502.50 a year. Individuals who claim a credit of less than $7,500 will also have a 15-year repayment period and will pay 6.67% of their credit each year. For example, an individual who claims a credit of $6,000 will repay $400.20/year ($6,000 x .0667). There is no interest charge applied to outstanding balances.
   
   
2. When do I make the payment?
   The home owner does not have to begin making repayments on the credit until two years after the credit is claimed. As a practical matter, repayments of credits taken in 2008 will not actually start until the 2010 returns are filed in 2011. Repayments for credits claimed on 2009 returns will go into effect for the 2011 tax year and are reflected on 2011 returns files in 2012.
   
   
3. Will the IRS put a lien on my property for the amount of the credit?
   The statute does not grant the IRS that authority. The rules for tax liens are quite specific about when the IRS can put a lien on the property. It is not yet known how the IRS will identify and stake its claim to the repayment.
   
   
4. What if I sell my house before the 15-year repayment period is complete?
   When the person who used the credit sells the home, any amount of the tax credit that has not been repaid will be due in the year of sale. For example, if an individual still owed $5,000 in repayments and realized $30,000 of proceeds from the sale of the home, the $30,000 of seller proceeds would be reduced to $25,000 and $5,000 will be remitted to the IRS. If the gain on the sale is less than the amount that must be repaid, part of the liability is forgiven. For example if the individual still owed $5,000 but the gain on the sale was only $3,500, then the seller would not be required to repay the IRS the $1,500 shortfall. If there was not gain or if there was a loss, then the remaining $5,000 would not have to be repaid.
   
   
5. Why must the money be repaid?
   Congress’s intent was to provide as large a financial resource as possible for homebuyers in the year that they purchase a home. In addition to helping first-time homebuyers, this will maximize the stimulus for the housing market and the economy, will help stabilize home prices, and will increase home sales. The repayment requirement reduces the effect on the Federal Treasury and assumes that homebuyers will benefit from stabilized and, eventually, increasing future housing prices.