First-Time Home Buyers Credit for Military Members

  • Published
  • By 55th Wing Legal Office
OFFUTT AIR FORCE BASE, Neb. --  As tax season approaches, the Offutt Tax Center has been receiving many calls concerning the first-time home buyers credit and wants customers to be aware of how this credit will impact the military community.

If you received the first-time home buyers credit in 2008 of $7,500, then you will begin paying it back on your 2010 tax return. Five hundred dollars will be taken each year over a 15-year period until the $7,500 is paid back.

If you are an active-duty servicemember and you have PCS orders more than 50 miles from your current residence, or you are compelled to move into government quarters, your payments will cease at that point. You will not have to pay the remaining balance on the original credit.

The year that this happens, you will file a paper return with a copy of your PCS orders and IRS Form 5405 attached to the tax return.

The credit in 2009 or 2010 of $8,000 was given with the understanding that the taxpayer did not have to pay it back if they lived in the home for 36 months, starting on the purchase date of the home.

The good news for the active-duty servicemember is this credit does not have to be paid back if you are on active duty and you have PCS orders more than 50 miles from your residence, or you are compelled to move into government quarters before the 36 months are completed.

The year that this happens you will file a paper return with a copy of your PCS orders and IRS Form 5405 attached to the tax return.

For those servicemembers who took the credit for either amount and are being affected by force reduction, the news is not as good. Because you will not be on qualified official extended duty orders, you will be required to repay the credits unless you continue to live in the home.

If the taxpayer sells the home, the amount of the allowed credit that must be repaid is limited to the gain on the sale.

If the taxpayer instead rents his home and does not continue to live there and does not intend to return in the short term, the taxpayer ceases to use the home as his principal residence and must repay the entire amount of the allowed credit.

If you decide to sell the home the year of the sale, you can still file electronically with the IRS Form 5405 attached.

Another issue with the first-time home buyers credit is the extension given for a member of the uniformed service. Your extended active-duty time must total at least 90 days during the period beginning Dec. 31, 2008, and ending May 1, 2010.

If your extended active-duty time did not end before May 1, 2010, you are not eligible for the credit. This has been misread by many taxpayers, realtors and even some IRS representatives. A review of the wording has gone up to the council group and they have stressed the fact that extended duty time had to end before May 1, 2010, to qualify for the credit.

The 55 Wing Tax Center is open Monday through Friday from 8 a.m. to 4:30 p.m. For more information, call 294-3759.