Depending on the amount of your credit, you may not have to pay back the entire amount. The IRS notes that the amount repaid each year is one-fifteenth, or 6.66%, of the credit for each taxable year in the 15-year recapture period, which begins with the second taxable year after the year of purchase.
“To find out how much you need to repay each year, take the amount of your credit and divide it by 15,” notes the IRS. “For example, if you received the maximum credit of $7,500, divide $7,500 by 15, which equals $500, and add the $500 to your income tax each year for 15 years. If you received a credit of $6,000, divide $6,000 by 15, which equals $400, and add the $400 to your income tax each year for 15 years.”
To repay the tax credit, use IRS Form 5405.
If you took the loan and don’t qualify for a pass from the government, it’s time to pay the piper – this year and, quite possibly, for many more after that.
—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.