First-Time Home Buyer Tax Credit. Despite its name, this program isn’t about first-time buyers nor is it truly a tax credit. Rather, it’s more like a 15-year interest-free loan from the federal government to any home buyer who hasn’t owned a home in the last three years. The so-called “credit” comes with a recapture rule that turns a one-time $7,500 tax break into a $500 annual tax liability for the next 15 years, which is not a happy thought. If the home is sold at a profit before the 15 years are up, the balance of the credit becomes payable in full. But if the home is later sold at a loss, the government writes off the balance. That hypothetically could create a probably insignificant, but nonetheless perverse incentive for the homeowner to sell the home at a loss if the gain would be less than the tax liability. And it again puts the federal government at risk.

getanewhome.net