Home Selling in Carmel>Question Details

Subarunubaru, Home Seller in Carmel, IN

$7,500 Tax Credit Payback When Selling Home: Dealing with Realtor Fees

Asked by Subarunubaru, Carmel, IN Mon Oct 4, 2010

My husband and I are about a week away from putting our home on the market. We took the $7,500 "loan" back at tax time in 2009 for purchasing our home in late 2008. We are in understanding that if we don't make money on our home, the $7,500 repayment is forgiven. The confusion comes in when determining what dollar amount the government will look at to see if we had a profit on the house. For example, let's say we owe $160,000 on our home. The final sales price ends up being exactly $170,000. We "profited" $10,000 on the sale of our home versus what we owe, but how do realtor fees figure into this? Let's say we have $10,000 in realtor fees. So technically, we broke even after the sale and realtor fees. Will the government take into consideration the realtor fees when determining what we have to pay back?

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12
Consider a consultation with your tax professional--he/she is your best source of advice regarding any tax issues and how they apply to your personal situation.
1 vote Thank Flag Link Mon Oct 4, 2010
Subarunubaru:

Great question. If your interpretation of the tax credit is accurate (talk to your accountant to determine your specific eligibility), the dollar amount which will be used to determine your profit (or loss) will be the NET proceeds from the sale: sales price minus all fees, commissions, tax prorations, etc.

Using your outline above, a $170k sale with $10k in fees results in a $160k net.

Hope that helps!

Joe Shoemaker
Principal Broker, REALTOR®
MacDuff Realty Group, LLC
317 413.8501
joe@joeshoe.com
1 vote Thank Flag Link Mon Oct 4, 2010
I would love the opportunity to help you if you haven't obtained a realtor. I specialize in helping people with tight equity sell their homes. However, its a sellers market right now, so, its a great time to sell!
0 votes Thank Flag Link Thu Jun 12, 2014
I would love the opportunity to help you if you haven't obtained a realtor. I specialize in helping people with tight equity sell their homes. However, its a sellers market right now, so, its a great time to sell!
0 votes Thank Flag Link Thu Jun 12, 2014
My wife and I dealt with the same issue. Our accountant at the time informed us that you can figure in any upgrades you did and any fees needed to sell the home. For example, realtor fees, cost for painting, inspection repairs, etc. after everything was said and done, we didn't have to pay the remaining portion back. Of course we also lost significant value since we bought in 2008, market crashed, and then we sold in 2010 when it was at the bottom.
0 votes Thank Flag Link Mon May 26, 2014
The best thing to do is talk to your trusted CPA- ask these questions before your house goes on the market
0 votes Thank Flag Link Mon Oct 11, 2010
Taken from IRS tax newsroom page.

Q. How and when is the credit repaid?

A. The first-time homebuyer credit is similar to a 15-year interest-free loan. Normally, it is repaid in 15 equal annual installments beginning with the second tax year after the year the credit is claimed. The repayment amount is included as an additional tax on the taxpayer’s income tax return for that year. For example, if you properly claim a $7,500 first-time homebuyer credit on your 2008 return, you will begin paying it back on your 2010 tax return. Normally, $500 will be due each year from 2010 to 2024.

You may need to adjust your withholding or make quarterly estimated tax payments to ensure you are not under-withheld.

However, some exceptions apply to the repayment rule. They include:

*
If you die, any remaining annual installments are not due. If you filed a joint return and then you die, your surviving spouse would be required to repay his or her half of the remaining repayment amount.
*
If you stop using the home as your main home, all remaining annual installments become due on the return for the year that happens. This includes situations where the main home becomes a vacation home or is converted to business or rental property. There are special rules for involuntary conversions. Taxpayers are urged to consult a professional to determine the tax consequences of an involuntary conversion.
*
If you sell your home, all remaining annual installments become due on the return for the year of sale. The repayment is limited to the amount of gain on the sale, if the home is sold to an unrelated taxpayer. If there is no gain or if there is a loss on the sale, the remaining annual installments may be reduced or even eliminated. Taxpayers are urged to consult a professional to determine the tax consequences of a sale.
*
If you transfer your home to your spouse, or, as part of a divorce settlement, to your former spouse, that person is responsible for making all subsequent installment payments.
Web Reference: http://www.TerriVellios.com
0 votes Thank Flag Link Mon Oct 4, 2010
I recommend reviewing the irs.gov website that Shelly noted. You need to take in account all fees and deduct that from the sales price to determine any profit you made.
0 votes Thank Flag Link Mon Oct 4, 2010
"Below is a link. Look at the section labeled "How and When is the credit repaid. You will take into account all improvements you have made on the home and all the fees associated with selling the home, including realtor fees. Take the sales price your receive and subtract all the above expenses. If you are in the negative you do not pay back the $7500.00 Please call me at 317-201-2601 and I will be glad to go through a scenario with you to help you understand where you stand. I am a Carmel specialist so I can help you with any questions you may have on the value of your home so you can run the numbers.
0 votes Thank Flag Link Mon Oct 4, 2010
It sounds very logical that "the cost of selling your home" should be factored in. However, the government has their own set of rules. I would carefully read through all of your documentation and go to the govt. website to get your question answered.

Beth Lyons
Keller Williams Realty
0 votes Thank Flag Link Mon Oct 4, 2010
It would be based on the Net Proceeds as earlier stated:

Sales Price - Selling Expenses, Fees and improvements. Your tax preparer would be the one calculating the information.

If you are interviewing Realtors, I would be delighted to interview for the job I live in Carmel and the majority of my business is in Carmel as well.

- Jason




Jason O'Neil
Founding Member | Broker Associate
Encore Sotheby's International Realty
p. 317.989.0074 f. 317.663.1031
Web Reference: http://oneilrealtors.com
0 votes Thank Flag Link Mon Oct 4, 2010
It would be based on the Net Proceeds as earlier stated:

Sales Price - Selling Expenses, Fees and improvements. Your tax preparer would be the one calculating the information.

If you are interviewing Realtors, I would be delighted to interview for the job I live in Carmel and the majority of my business is in Carmel as well.

- Jason




Jason O'Neil
Founding Member | Broker Associate
Encore Sotheby's International Realty
p. 317.989.0074 f. 317.663.1031
0 votes Thank Flag Link Mon Oct 4, 2010
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