After weeks of intense negotiation, the new first time home buyer tax credit of $8,000 was signed into law this week. Here are some first time home buyer tax credit FAQs:
Will I qualify for the credit?
You qualify for the full credit if:
- You close on a home between January 1, 2009 and December 1, 2009 AND
- You haven’t owned a home in at least three years AND
- Your adjusted gross income is less than $75,000 (single) or $150,000 (married).
How much is the first time home buyer tax credit worth?
The credit is for 10% of the purchase price of the home, up to a maximum of $8,000.
What if I wouldn’t owe $8,000 in tax?
Not a problem. The first time home buyer credit is refundable, meaning that you get the money even if it exceeds what your tax liability would have otherwise been.
Do I have to pay back this money?
No. You keep the $8,000.
Really?
Yes, unless you sell the home within three years.
How is this different from the previous version of the home buyer tax credit?
In several ways. Read more about the 2008 version of the first-time home buyer tax credit and note that it
- Has a maximum value of $7,500.
- Must be paid back over 15 years.
- Is applicable to homes purchased after April 9, 2008 and before July 1, 2009.
The new credit seems better. If I qualify for both, why would choose the old one?
You wouldn’t.
What other questions do you have? Comments? Happy to see this credit because you’re about to buy a home? Ticked off because you bought one in late 2008 or even 2007? Do ask. Do tell.
Update: Here are your first time home buyer tax credit options if you buy a home after April 15, 2009.
Second update: Here are the new rules for those who buy their homes after November 6, 2009.
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I have a first-time home buyer from 2007 wanting to go back and file a 1040X to claim his credit. Is it true that only the District of Columbia was eligible for this credit in 2007? Taxpayer closed on the house on 12.21.2007.
@Mike: There was no national first time home buyer tax credit prior to April 2008. DC has had one for sometime – it is not covered in my blog.
I recently bought a house from my stepmother but my dad has been deceased for almost 15 years. Will she be considered a relative & disqualify me from 1st time home buyer credit? Thanks
@Laurie: Step-relatives do not appear to be considered close relatives.
I was a resident allien by the end of 2009, and my spouse was a non-residnet allien. under publication 519, we elect to be treated as resident allien for the entire year for tax purpose. will this resident allien status dis-qulify us from the 8000 credit?
Also, will a dual-status allien(not a nonresident allien) be disqulified from the 8000 credit?
Thanks
@justforchild: Sorry, the whole resident and non-resident alien issue is beyond the scope of this blog. Suggest you contact the IRS directly. Good luck!
I am a resident allien at the end of 2009, and my spouse is a nonresidnet allien in 2009. we elect to be treated as resident allien for tax purpose for the entire year, based on IRS publication 519.
Will this resident allien status disqulify us from first time home buyer credit?
Purchased our home we were renting from my mother in law, but the contract and HUD is only in my name. Before we went through the loan process, my mother in law quit claimed part ownership to my wife to expedite the loan process since the home was in foreclosure. Eventually, due to credit, we settled on just myself on the mortgage and not both of us. Now we cannot claim the credit as married filing jointly, because of the mother/daughter relationship. If I get a letter from the court explaining the quit claim, can we file married filing separate and I get the $4000 since mother in law is not a banned relationship?
@David: Actually, a mother-in-law is a “banned relationship” since it’s your wife’s mother – if she’s excluded, so are you – no matter whether you file separately or not. Now whether a mother-in-law should be considered a “banned relationship” outside of the first time home buyer tax credit is a matter for another day
yeah, we won’t get into the whole mother in law thing… Won’t fly even if we file separately, my name is the only name on the HUD and contract, the person I purchased from is neither ancestor or descendant to me, and I am the only one claiming the credit? By the way, thanks for the service!
@David: Thanks. Sorry – I truly believe it won’t fly. Could try to call the IRS and see if they view it differently but I’m skeptical.
I have a question. My sister & I purchased a home in 2009. We each received back $4000.00 for First Time Homeowners Credit. My sister is the first borrower on the loan. She plans to stay in property for the required 3+ years. I am thinking of moving out. Would we be responsible in repaying back the $8000.00 credit? If so, do we have to pay back in one lump sum? Any help I can get on this issue would be greatly appreciated. Thanks.
@JJ: As I understand it, you would need to pay back 100% of your share (presumably the $4,000 if that’s what you filed for). Yes, it will be due in one lump sum.
I purchased a home with my girlfriend and receieved 1/2 of the tax credit on my return. We have just recently split up and I have decided to move out of the house. I know that I am responsible for repayment my portion of the credit in this scenario. Is there anyway for her to amend a previous tax year to qualify for the full credit rather than the 1/2 credit she has already recieved? Thanks you!
@Frankie: I actually don’t know, so I advise you contacting the IRS. What I’d propose is you both amending your previously filed returns so that you claim none of the credit (and therefore must pay it back) and she claims all of it. Whether that will work is unknown (hence the call to the IRS) but if you get someone to work with you and file each with a copy of the other and a letter of explanation, you’d have a shot. Good luck!
Thank you for you response. The Act appears to provide for a LIMITATION BASED ON GAIN. Would I be able to sell her my portion of the home for an ammount equivelent to my credit to avoid having to repay the credit?
and one last question! Am I correct in assuming that I cannot act similar to a married person by transferring the home and thus shifting liability to my ex-girlfriend should she decide to sell prior to the 36month cutoff. Is there anything that allows for the “married” rules to apply to unmarried individuals?
@Frankie: Not really sure of your objectives here (trying to keep as much of the credit for yourself vs. keeping as much as possible on a combined basis). Regardless, you’re not married. If you sell her 1/2 the home, you’re still selling the home and you’d have to pay the credit back. Best I can do for you is my original answer – good luck!
My fiancee and I are purchasing a condo with my fiance’s dad. We are paying all cash. Both my fiance and I qualify for the first time home buyers tax credit but my fiance’s father does not. Can we qualify for the tax credit? It will be mine and my fiance’s primary residence but not his father’s. Does it matter how tenancy is take in order to qualify?
Does it matter what percentage ownership we each take as tenants in common?
@Natalie: No worries, just make sure you and your fiance take all the credit and your father-in-law takes none. Your percentage ownership is irrelevant so long as you own at least some of it. Congratulations!
If I bought the home that my decesed mother left in her revocable living trust from my three brothers and three sisters do I qualify for the the tax credit
Michael,
Isn’t a stepparent married to your blood parent by definition? So can you claim the credit if you purchase from a stepparent?
@Claudia: Curiously, the definition of a related party does not include siblings. As such, the purchase of a home owned by your siblings is not excluded. (Had you purchased it from your mother, it wouldn’t have qualified). So be sure to structure the sale so that your siblings are the owners, not the trust which could make it murkier.
@HK: Yes, however, not every home is owned jointly. As such, if your step-parent owns a home that your parent does not, it would not be excluded if you purchased it from the step-parent alone.