The Real Estate Bloggers

Nearly A Million New Home Buyers Tax Credits Need To Be Repayed

Posted: 10 Sep 2010 05:18 AM PDT

Money_down_the_drain According to the Inspector General for Tax Administration 950,000 families took the New Home Owners Tax Credit incorrectly and will need to repay the money to the government.

First, how badly can a program can be implemented that over half of the people who applied got the specifics wrongs. Seriously, only the Federal Government could screw this up. If it was a private business that messed this up so badly every channel on the television would have lawyers advertising for the class action lawsuit.

Secondly, this is going to leave a great deal of pain across the country. The typical home bought with the new home owner tax credit was a first time home or on the lower end of the housing spectrum. Essentially families for which 8,000 dollars is a lot of money. Now they will have to come up with it in cash, not roll it into the mortgage as they would have, and pay Uncle Sam, or face ridiculously high penalties and interest.

This is not what we want to deal with during a recession.

According to a report from the Inspector General for Tax Administration, released to the public Thursday, about 950,000 of the nearly 1.8 million Americans who claimed the tax credit on their 2009 tax returns will have to return the money.

The confusion comes because homebuyers were eligible for two different credits, depending on when their homes were purchased.

Those who bought properties during 2008 were to deduct, dollar for dollar, up to 10% of the home’s purchase price or $7,500, whichever was less. The catch: The money was a no-interest loan that had to be repaid within 15 years.

Had they waited to buy until 2009, they could have gotten a much sweeter deal. Congress extended the credit and made it a refund rather than a loan.

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Nearly A Million New Home Buyers Tax Credits Need To Be Repayed