Repaying the 2008 First-Time Home Buyer Tax Credit - Quicken Loans Zing BlogOnce upon a time there was a young couple that decided it was time to buy a house. They searched for the home of their dreams and found a cute bungalow that met almost all of their needs. When they went to buy the house in December of 2008, they were also excited about the $7,500 first time homebuyer tax credit offered by the government of their fair United States. The tax credit had to be paid back over a course of 15 years, but it was essentially an interest-free loan and seemed like a pretty good deal.

“Boy oh boy!” The girl, who was beautiful, talented and charming, exclaimed in her exquisite voice that many likened to a chorus of angels, “Everything is working out just great for us!”

The couple purchased their house and moved in. A few short weeks later, as they were settling into their new home, the government made a tremendous announcement! They were revamping the first-time homebuyer credit program!

“How could it possibly get any better?” The boy, who was handsome, funny and incredibly intelligent, asked himself in his brain, of which he used 95% (extremely impressive, seeing as most humans use only 10% of their brain power – a testament to his intellect and sharp wit).

“HEAR YE, HEAR YE!” Sir HUDsley of the U.S. Government proclaimed, “In 2009, we will be making the first-time homebuyer tax credit even better! First-time homebuyers can have $8,000 of FREE government money! That’s right! You don’t have to pay it back ever!”

“But, what about us?” The girl, for whom the song “The most beautiful girl in the world” by Prince was written, asked Sir HUDsley. “We bought our house 2 weeks ago. Surely we don’t have to pay back our credit now that you’re offering up this free one.”

“NOPE. You gots to start paying that back in a couple years. Soz. HUDsley out!”


I wish the above story was a fabrication, dear Zing readers, but unfortunately for me and anyone else who took advantage of the first-time homebuyer credit in 2008, the tale I’ve spun for you above (especially the parts about the couple and how great they are) is entirely true.

If you claimed and received the one-time credit on your income tax return for 2008, you must repay the credit. It is repaid as an additional tax on your tax return, and you’ll be paying it back every year for 15 years, or until 2024 if you started repayment on your 2010 tax return.

If you move or sell the home you purchased to obtain the credit, your home will no longer be considered your “main home” and you may need to repay the entire unpaid credit in one lump sum. YEESH.

Your home is no longer considered your main home when:

  • You sell your home.
  • You convert the home to a rental, business, vacation or second property.
  • You no longer live in the home for the greater number of nights in a year.
  • Your home is destroyed or condemned.

The only exception is if your home is destroyed or condemned and you buy a replacement home within two years, you can continue to repay the credit in annual installments. How nice!

How can I get out of repaying the 2008 first-time homebuyer credit?

Unfortunately, there aren’t a lot of options for getting out of it. Here are the only listed exceptions:

  • You get a divorce and your ex-spouse gets the house. You don’t have to pay it back, but your ex-spouse still does.
  • If you or your spouse is in the military and your house was sold due to service-related relocation, you don’t have to repay the credit.
  • If you die. Bummer, but at least you won’t have to make those (or any other) payments (or any other things, ever…because you’d be dead.)

And that’s pretty much it. I’ve been wishing that the government will just be “really nice” and forgive it for all of us, but so far my wishes have not come true. I’ll keep you posted.

Is it possible to only repay a portion of the 2008 first-time homebuyer tax credit?

Yes. If you sell your home you might qualify for a reduced repayment amount. To determine what you’d need to pay back, follow this simple formula:

Purchase price of the house:      $200,000 (example)

Less the tax credit amount:        -$7,500

Your net cost:                              $192,500

Any money gained from the sale of the house (difference between the sale price and your net cost) you’ll be responsible for paying back. So in the above example, if you sold your house for $195,000, you’d be responsible for paying back $2,500 total. That’s a little better than the full $7,500.

Sorry I don’t have better news for anyone looking to get out of the credit. To make things a little easier for us come tax time, I list an additional withholding in our paycheck to make sure we have our tax credit payment covered. If you get paid bi-weekly, you can ask your employer to withhold an additional $20 per pay period and by the end of the year, you’ll have withheld an extra $500, just enough to cover your tax credit payment. Remember, always consult your financial advisor before making any financial decisions.

Good luck to all of my fellow 2008 tax credit-ers, and if you see anyone who bought a their first home in 2009, be sure to shake your fist at them for me.

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This Post Has 9 Comments

  1. I just sold my 2008 purchased home recently. Aprox. 2 years after the purchase I became disabled and began to collect disability payments. I managed to keep the home by juggling money and selling my beloved mechanic tools. The home was a show place. A diamond in a goats ass I guess you could say considering the development it was located. I needed to make it a showplace in order to sell it to cover the years I was moving from one credit card to another to fix it up and just afford to keep the lights on. I sold it for much more than the original purchase price and almost enough to pay everything off. I just did my taxes and have to pay back almost 3 grand on the “FIRST TIME HOME BUYERS TAX CREDIT”. Lovin it. Anyone think a nice letter to the IRS asking for more time to pay would help? Has anyone just tried to ask for a loan extension from them rather than just crying about why do we have to pay it cause they didn’t. I know I sound ruff but hey, A DEAL IS A DEAL and we made it.

    1. Hi Kevin:

      Sounds like you’re in a tough spot. Unfortunately, the best advice I can give you is to contact a tax adviser. Good luck!

      Kevin Graham

  2. Any updates or progress in Washington on this silly rule that punishes 2008 homebuyers, but not 2009 or 2010 homebuyers when the house is sold in 2015?

  3. I bought my first house in Oct, 2008. No one told me about the payback…, lender, friend, neighbor….no one. I was 61 years old at the time and bought a “repo” that needed a LOT of work, which I took advantage of the credit for. I’m almost 66 now…out of work….Social Security will start for me at 66. Where in the world am I going to find that payment every year? THAT LOAN may just cost me the house eventually. Maybe I should change my citizenship to that of a third world country……the USA would certainly help me out then!!!

  4. I currently as of 2-24-12 have a petition online to be signed to “Abolish the first time home buyers tax credit payback of 2008” Please direct people to facebook for the petition. It will go to Washington as soon as I have 50 votes and I have nearly 40 now. This concerns myself and t housands of people who are being treated unfairly with this “credit”. Also you can find the petition on No Thank you

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