My wife and I are 25-months into an FHA loan (we received a first time home buyer tax credit), and I seem to recall that we cannot sell or rent the property for at least 36-months. That wasn't a problem when we inked the agreement, but there have been some reversals at my workplace, and I am becoming concerned I may be laid off in the coming months.

I believe I can find a new job without too much trouble; however, since I have a niche skill (GIS programming) I am not confident I can find something in the same city/state. I recall we are required to "return" the tax credit if this does not remain our primary residence, but after a cursory search, I have not found a FAQ or discussion of options for people in this situation.

Does anyone have some helpful experience or insights? I think we would lose money by selling, so we would prefer to rent the property if possible.

Thanks in advance!


@littleadv's answer is both informative and helpful, but I'm waiting to "accept" it until I'm relatively sure nobody will emerge with a loophole. For example, if the IRS designates a primary residence, could I move a few months ahead of my wife and sublet a place whilst retaining our present utilities and banking; then, once our 36-month obligation is complete, my wife rents out our current home, joins me elsewhere, and we get a different place (i.e. not the sublet)? Finally if that may be legal, ..is it actually honest? It seems like a very fuzzy line.

These links were helpful toward understanding the meaning of "Primary Residence": http://johnrdundon.com/dwelling-unit-vs-primary-residence/ http://realtytimes.com/rtpages/20010129_residence.htm

  • It is a fuzzy line, and although I don't believe you'll be caught, I do believe you'll be breaking the rules. If you're audited for whatever reason, it will likely come up. If you're going to try something like that - better consult with a tax lawyer.
    – littleadv
    Dec 8, 2011 at 18:41
  • 2
    No loophole to be found. Its pretty simple you must retain your home for 36 months as your primary residence. Now if you were to find a job several hours away and drive(or fly) there during the week and return for weekends while staying in a hotel or temp lodgings during the week your home is still your permanent residence. What you do not want to do is sign a lease or rental agreement in your new location.
    – user4127
    Dec 8, 2011 at 20:47

1 Answer 1


You can find the details in the IRS instructions for the form 5405. Summary - you have to repay the credit if you move, even if it is because you were laid off. However, if you sell the house, the repayment is limited by your gains. If you sell at a loss - you don't need to repay. Also, if you die, you don't have to repay, don't know if it helps.

  • 1
    So are you saying just die, and it won't matter? Sorry, couldn't help myself;-) Jan 9, 2012 at 4:22
  • 5
    "Sir, for your taxes, we advise you to die before the end of thís year."
    – Konerak
    Jan 9, 2012 at 5:03
  • +1 A good answer, but one point of emphasis, the person you sell it to at a loss or small gain has to NOT be related to you to take advantage of the repayment waiver. No loophole there, unfortunately.
    – Pablitorun
    Mar 15, 2012 at 17:22

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