What You Still Need to Know about the First-Time Homebuyer Credit

By RJ McArthur, CPA , EKS&H – Ehrhardt, Keefe, Steiner & Hottman PC In an attempt to help stimulate sluggish home sales, Congress provided a federal tax credit to certain qualified homebuyers who purchased a principal residence after April 8, 2008, and before May 1, 2010. This credit was extended through May 1, 2011, for certain members of the uniformed services on extended duty. It has been almost two years since the program was available for most first-time homebuyers, and many people have forgotten about the benefit they received. More importantly, many people have forgotten about the strings that were attached to the original benefit. As is the case with many federal tax credits, what the government giveth, the government can taketh away. This is especially true for credits earned on homes in 2008 but can also be true for other homes purchased that qualified for the credit. In this article we will discuss the differences in the credits that were provided by Congress, what a homeowner needs to know even years after the program has ended, and what a homeowner can do to minimize or eliminate the possibility that the government comes to take the credit back. Two categories The First-Time Homebuyer Credit (FTHBC) can be divided into two distinct categories:

  • Credits on residences purchased before January 1, 2009
  • Credits on residences purchased after December 31, 2008

Homes purchased in 2008 For qualifying homes purchased in 2008, the FTHBC must be recaptured (repaid by the homeowner) over 15 years, with payments starting in 2010. In essence, the credit was really an interest-free loan that had to be repaid over 15 years starting two years after the purchase of the home. The repayment is made by increasing the income tax of the homeowner by 1/15th of the credit for tax years 2010 through 2024. If the home is disposed of or of it ceases to be the primary residence of the homebuyer, the repayment of the credit is accelerated into the year of the disposition or when the home is no longer the primary residence. Illustration: A homebuyer purchased a home in 2008 for $100,000 and received a FTHBC of $7,500. In 2012 the homeowner sells the home for $120,000. On the 2010 and 2011 tax return, the homeowner was required to increase their tax by $500 each year ($7,500 divided by 15 years). In 2012, the homeowner must pay an additional tax of $6,500 (the $7,500 credit less the $1,000 previously recaptured, $500 in 2010 and $500 in 2011). Homes purchased after December 31, 2008 For homes purchased after December 31, 2008, that qualified for the FTHBC, the rules are much more lenient. For these purchases, the credit only has to be repaid if the home is disposed of or it ceases to be the homebuyer’s personal residence during the 36-month period beginning on the date of the homebuyer’s purchase of the principal residence for which the credit is allowed. Therefore, if the homebuyer maintains the home as their personal residence for at least 36 months, they will never have to repay the credit back to the government. Illustration: A homebuyer purchased a home on July 1, 2009, for $100,000 and received a FTHBC of $8,000. On March 1, 2012, the homebuyer sells the home for $120,000. Since the home was not held as the homebuyer’s personal residence for 36 months, the homebuyer must pay an additional tax of $8,000 on their 2012 tax return. If the homebuyer does not sell the home until July 2, 2012, they would not have to repay the $8,000 credit. Minimizing the recapture Although the government recapture of the credit on an early disposition of the home seems inevitable, there is something homebuyers can do to minimize, if not eliminate, the recapture all together. In the case where a home is sold to a person who is not related to the homebuyer, the recapture of the credit is limited to the amount of gain (if any) from the sale. For this reason it is important for homebuyers to track the cost of improvements that may reduce the gain on the sale. For purposes of determining the gain, the basis of the home is reduced by the amount of the credit previously received. Thus, even in cases where the homebuyer breaks even on a sale, they will have recapture of the credit. Illustration: A homebuyer purchased a home on July 1, 2009, for $100,000 and received a FTHBC of $8,000. In 2010, the homebuyer spent $26,000 remodeling the kitchen. On March 1, 2012, the homeowner sold the home for $120,000. The adjusted basis of the home is now $118,000 ($100,000 + $26,000 – $8,000). The gain from the sale, then, is $2,000 ($120,000 – $118,000). Therefore the seller must pay the additional tax of $2,000 on their 2012 return and does not need to pay the entire $8,000 credit. One final word of caution: The above illustrations show the consequences when a qualifying home is sold. However, the tax rules also apply when a home ceases to be the homebuyer’s principal residence which can occur in a number of different ways, including converting the home to a rental home or vacation home. In the event of a divorce, the spouse who receives the home will be responsible for all future repayments of the 2008 credit or the credit recapture, if any, from purchases after December 31, 2008. Homebuyers are encouraged to talk to a tax professional before making any changes are made to the status of the home as a principal residence. 

 **The content for this article was provided by Land Title Guarantee Company

Best Colorado Springs events of Summer 2016

Most people know Colorado Springs is home to Pikes Peak, the Garden of the Gods, three U.S. Olympic Training Centers, the U.S. Air Force Academy and numerous museums and cultural centers. However, not everyone knows the area is home to some fun and unique annual festivals and events. From donkey races to wine tasting to the arts, there’s plenty to do in Colorado Springs this summer.


Manitou Springs Wine Festival

When: June 4, 2016 Where: Memorial Park in Manitou Springs What: Wine enthusiasts, rejoice! Named as one of “The Best Festivals and Fairs in Colorado this Summer” by TravelMag, the annual Manitou Springs Wine Festival brings wine fans from near and far to enjoy wine from 30 Colorado wineries, along with food, vendors and live music.

Colorado Springs Summer Rodeo Series

When: June 15, 22 and 29; July 6 and 27; and August 3, 10 and 17, 2016 Where: Norris Penrose Event Center in Colorado Springs What: During the rodeo, attendees will see traditional rodeo events like mutton bustin’, calf scramble, steer riding and more. A petting zoo, rodeo games and beer garden will be available each rodeo day beginning at 4:30 p.m. Stick around after the rodeo for live country music.

Pikes Peak Airstrip Attack

When: June 18-19, 2016 Where: Colorado Springs Airport What: As the beginning of Pikes Peak Speedweek, the Pikes Peak Airstrip Attack is a two-day event featuring side-by-side racing on a half-mile track with high-speed cars from around the world.

Royal Gorge Whitewater Festival

When: June 24-25, 2016 Where: Centennial Park in Cañon City What: This two-day festival features everything — river board freestyle, fly casting, kayaking, rafting challenges, and inner tube and community raft races. Visitors can also enjoy live music, food and drinks, a kids’ zone, vendors and more. Started in 2001 as a “Build Your Own Boat Race,” the Royal Gorge Whitewater Festival has continued to grow annually to develop the Whitewater Park in Cañon City.

85th Annual Donkey Derby Days

When: June 25-26, 2016 Where: Cripple Creek What: The annual Donkey Derby Days was started 85 years ago by Charley Lehew as a way to bring people to Cripple Creek in the summer. This two-day event features donkey races, live entertainment, a parade, family activities, street vendors, heritage competitions and a dog show.

Pikes Peak International Hill Climb

When: June 26, 2016 Where: Pikes Peak What: Beginning in 1916 by Spencer Penrose, the Broadmoor Pikes Peak International Hill Climb happens on the final Sunday of June as the end to Pikes Peak Speedweek. Sidecars, motorcycles, semi-trucks and unlimited racers compete in this event to race on a twisty road to summit of Pikes Peak. They scale the mountain along the 12.42-mile course; the current record is 8 minutes and 13.878 seconds. Although the race only happens on one day, fans can view practice and qualifying races from competitors the week of the race.


Pikes Peak or Bust Rodeo

When: July 13-16, 2016 Where: Norris Penrose Event Center in Colorado Springs What: Started in 1937, the Pikes Peak or Bust Rodeo has a long legacy as a great family-friendly event. The rodeo features mutton bustin’, pony rides, mechanical bulls, vendor booths, fried food and other activities.

El Paso County Fair

When: July 16-23, 2016 Where: El Paso County Fair and Events Complex in Calhan What: Originally started in 1905, the El Paso County Fair has grown into a 40-acre annual event that brings rodeo fans from all around. The eight-day rodeo features live music, carnival rides, 4H animal shows, arts and crafts, fair food, petting zoo, auto races, talent show, demolition derby and the rodeo.

Rocky Mountain State Games

When: July 22-24 and July 29-31 Where: Colorado Springs What: The Rocky Mountain State Games are a member of the U.S. Olympic Committee and are a multi-sport festival for athletes of all ages and abilities. Sports at the games include air hockey, arm wrestling, swimming, table tennis, ultimate Frisbee and more.


Vino and Notes

When: August 6, 2016 Where: Woodland Station in Woodland Park What: This wine, food and jazz festival features more than 20 wineries, food pairings with the wine, vendors and a lineup of live jazz music that will set the tone for a great day.

Mountain Arts Festival

When: August 6-7, 2016 Where: Ute Pass Cultural Center in Woodland Park What: With Pikes Peak as the backdrop, this festival is the perfect place to browse jewelry, woodcarvings, paintings, pottery and more from artists across the country.

Pikes Peak Ascent and Marathon

When: August 20-21, 2016 Where: Begins in front of Manitou Springs City Hall What: The Pikes Peak Ascent and Marathon are not your average half-marathon and marathon. With high elevations and altitudes, runners must complete a qualifying event before registering. In 1959, Arlene Pieper became the first female finisher of a marathon at this Pikes Peak race. There you have it: a whole season worth of festivals and events you can’t miss here in Colorado Springs.  Summer is a great time to explore the greater Colorado Springs area.

Colorado Springs Area Farmers Markets

Colorado Springs area farmers markets are opening soon, and residents can pick up fresh produce and local products at a variety of spots throughout the city and beyond. The 2016 farmers market season is a great excuse to explore neighborhoods and outlying cities. Here are some of our favorite markets in the area: 

Banning Lewis Ranch

6885 Vista Del Pico Boulevard in Colorado Springs 1 to 6 p.m. Thursdays from May 26 through Sept. 29 (719) 592-9420

Briargate Farmers Market

7610 North Union Boulevard in Colorado Springs 9 a.m. to 3 p.m. Wednesdays from May 18 to Oct. 19 (719) 592-9420

Cañon City Farmers Market

Veterans Park, 211 S 3rd Street in Cañon City 8 a.m. to 1 p.m. Tuesdays from June 7 to Oct. 11 (719) 671-2519

Castle Rock Farmer’s Market

414 Wilcox Street in Castle Rock 8 a.m. to noon Saturdays from July 9 to Sept. 24 (720) 272-5517

Chapel Hills Mall

Briargate and Academy Boulevards in Colorado Springs 9 a.m. to 3 p.m. Saturdays from June 4 to Oct. 29 (970) 785-6133

Colorado Springs Pioneers Museum

215 South Tejon Street in Colorado Springs 3 to 7 p.m. Wednesdays from June 15 to Oct. 12 (719) 640-6154

Cordera Farmers Market

11894 Grandlawn Circle in Colorado Springs 11 a.m. to 4 p.m. Sundays from June 5 to Sept. 25 (719) 592-9420

Downtown Sunday Market

Acacia Park, 115 E Platte Avenue in Colorado Springs 9 a.m. to 2 p.m. Sundays from June 12 to Oct. 9 (719) 886-0088

Florence Farmers Market

Pioneer Park, Pikes Peak and Third Street in Florence 8 a.m. to 1 p.m. Thursdays from June 2 through Oct. 13 (719) 784-6489

Fountain Farmers Market

116 South Main Street in Fountain 7 a.m. to 6:30 p.m. Tuesdays in May 31 through September (719) 382-8930

The Margarita at Pine Creek

7350 Pine Creek Road in Colorado Springs 9 a.m. to 1 p.m. Saturdays from June 11 to Oct. 8 (719) 640-6154

Meridian Ranch

10301 Angeles Road in Peyton 1 to 6 p.m. Tuesdays from June 7 to Sept. 27 (719) 592-9420

Monument Hill Farmers Market

66 Jefferson Street in Monument 8 a.m. to 2 p.m. Saturdays from May 21 to Oct. 15 (719) 592-9420

Old Colorado City

Bancroft Park, 2408 West Colorado Avenue in Colorado Springs 7 a.m. to 1:30 p.m. Saturdays from May 7 to Oct. 29 (719) 574-1283

Pikes Peak Urban Gardens

Harlan Wolfe Ranch, 915 West Cheyenne Road in Colorado Springs 9 a.m. to noon Saturdays in June through September (719) 651-3416

Pueblo Riverwalk

125 Riverwalk Place in Pueblo 3 to 8 p.m. Thursdays beginning June 23 (719) 595-1589

Woodland Park

221 S Center Street in Woodland Park 7 a.m. to 1 p.m. Fridays in June through September (719) 689-3133

Western Museum of Mining & Industry

225 North Gate Boulevard in Colorado Springs 8 a.m. to 4 p.m. Mondays and Wednesdays in June through October (719) 488-0880   Be sure to double-check market hours and days before you head out, as times are flexible and subject to change. Enjoy all the great neighborhoods in Colorado Springs, and have fun exploring.