2010 Home Buyer's Tax Credit Repayment Exceptions

I got the Home Buyer's Tax Credit for a home purchased in 2010. The credit was 5,000. I am selling the home after living in it for 18 months (before the 36 month occupancy rule). I will be buying another main home with the money received from the sale of the original home. I have researched the rules for paying the money back to the gov for the credit and understand there is an exception to the repayment rule. Here is what I found at the IRS web site:

"You may have to repay the full or a part of the credit when:

    You sold your main home to a non-related person or entity. You repay the amount of the credit up to the amount of your capital gain. Note: when calculating gain or loss on your main home if you received the first-time homebuyer credit, you reduce your basis by the amount of the credit. See Publication 551, Basis of Assets, for more information."

I went to publication 551 but don't understand what this is about. Can anyone help me decifer this information to see if I can defer paying back the full or partial amount of the credit?
Thanks for any help.
 
Publication 551 URL.
http://www.irs.gov/newsroom/article/0,,id=206293,00.html
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    It means that (in my example) $4,000 will be added to your tax liability for the year it ceases to be your residence.

    Also, using my example, you would have a loss, not a gain, so you would not have a capital gain.

    "Basis" is a tax term that in most instances means cost.  Your cost or basis in my example was $100,000.
    • In my example. I paid 52,500 dollars for my home in April 2010. I got a home buyer's credit of 5,250 dollars. If I sell my home before 3 years then I owe back the money except under certain circumstances. The exceptions to the payback are outlined above. Do I qualify to not pay the home buyer's credit under the circumstances outlined in publication 551? Thanks for the feedback. Calvin
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    First, to simplify, purchasing a new home has no effect on the recapture.

    Let's see if an example will work.  Assume that your home cost $100,000.  You sell the home for $105,000 but incur $6,000 in closing costs.  You would normally have a loss of $1,000  ($105,000 - $6,000 - $100,000.)

    However, for purposes of recapture only, your home is actually considered to have cost you only $95,000 ($100,000 less the $5,000 credit.)  In such an instance your gain would be $4,000 ($105,000 - $6,000 - $95,000).

    You would need to recapture $4,000 of the $5,000 credit in that example.
    • I guess I need to refine the question. First: what does it mean (simple english for non-tax professional, layman) "You repay the amount of the credit up to the amount of your capital gain"?  Second: Is the Homebuyer Credit considered to be a "capital gain"? Third: I didn't itemize in 2010. What does "reduce your basis by the amount of the credit" mean? What is the "basis". . Thanks for any advice or clarity. Calvin
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    Calvin, you don't provide enough information to answer that question as it depends on what you sell your house for and what closing costs you would incur.
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      In that case you would have no recapture as you would have an assumed loss, after reduction of your cost by the amount of credit, of $50.
      • Thanks for all the replies. One more question?  Can I be certain that these rules apply to the home buyer's tax credit for 2010? Thanks again.
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      Calvin, these are volunteers on this forum.  They answer questions to the best of their ability and experience, and most are very good at that.  However, if you want guarantees you should probably approach a professional tax adviser.
      • Thanks for all your help. Calvin
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      Thanks for the input. Let's say I sell my house for 47,250 and 300.00 closing costs. Thanks.
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