Some people who got homebuyer tax credits owe the IRS, as their credit was no refund. Image from Wikimedia Commons.
One of the few things that helped to prop up an anemic housing market was the homebuyer tax credit from the government. The way it worked was that a person that bought a home could get some fast cash from Uncle Sam as a gift for doing their part in stimulating recovery, under certain conditions. A fair portion of those people are going to have to pay that credit back, as the initial tax credit offered for a purchase of a home was no credit; those refunds were essentially low interest loans.
Quick cash from Washington
When the recession began, it hit the housing market like a hurricane. Foreclosures shot through the roof, prices and available capital for home finance loans plummeted. Almost right away, part of the initial stimulus programs was a homebuyer tax credit. In 2008, qualified buyers could deduct the lesser of $7,500 or 10 percent of the purchase price from their income taxes. In 2009, the credit was extended but augmented to a refund, rather than a deduction. The hitch is that the deduction from the initial tax credit, according to CNN, was not just a break on the tax bill. It was a loan.
Due to the IRS in 15 years
Those who claimed the tax credit have 15 years to pay it back. There are 950,000 people who owe for the low cost loans, according to the Internal Revenue Service. However, the IRS does not know exactly who owes and who doesn’t, and is investigating inaccurate and fraudulent paperwork. Among the discrepancies is that there were tax credits filed for people who are dead. There were 1,326 homebuyer tax credits claimed by people listed as deceased by the Social Security Administration, but over 500 were tossed out.
The worth of the stimulus
The effectiveness of the stimulus programs has been questioned rigorously in the past months. Rightly so; the mortgage modification program hasn’t been very successful, and the bonus that 950,000 or more people believed they were getting for a home purchase has to be paid back. There is also the question of whether these people would have bought homes had they known they weren’t really getting a tax break.
