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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Yes sir, We own the home together. She lives in the in-law apartment.
I can only hope that it doesn’t ruin my chances of receiving the $8,000.
Also, form 5405 asks “did you receive your home from a relative?” , I should put no? How are they going to know that this person is my brother?
OH and…
I am married (not to my mother,of course! Lol) – We bought the home in April of 2009 & I got married in september of 2009. I am filing married jointly. His name is not on the mortgage/deed. Do you think that would effect whether I get the $8,000?
@Nicole: Look at page two of the instructions to Form 5405 and you’ll see the definition of a relative for the purposes of this credit. Since you weren’t married at the time you bought the house, your husband’s doesn’t matter (again, for purposes of the credit only). He matters otherwise – at least for the first few years of marriage
This is very unfair. I bought my first house in June 5, 2009. The income eligibility was raised but only applicable to houses purchased after November 6, 2009. Is there a way with this?
@Olivia: While those who have benefitted from the quirky and ever-changing rules might beg to differ, I understand where you’re coming from. Just remember, I’m only the messenger.
I have a question regarding the first time homebuyer credit.
If my in-laws give my husband and I land this year (no home is on the property) providing us with a deed to the real estate and my husband and I then purchase a modular or double wide and permanently affix it to that land are we able to claim the first time homebuyer credit on the modular/double wide assuming we meet the income requirements and the other requirements for claiming the credit?
If so, does the home have to be permanently affixed to the land prior to the June 30, 2010 deadline?
Thank you in advance for your assistance with this question.
@RL: I would think so, but that’s a specific-enough question that warrants a call to the IRS to be certain.
hello, i have a few questions regarding the tax credit. 1. would i qualify if i use a co-signer to purchase home? 2. i know there is a maximum amount of money you can earn to qualify but is there a minimum? 3. if the home i purchase is only $55,000 if im correct i will i only get back $5,500 right?
@leonard: 1) no problem 2) no minimum 3) yes, 10% of purchase price is one maximum (the other is $8,000 or $6,500 depending onn whether it’s a first timer or not).
Hi,
My sister and I are buying a house together. Both of us are first time home owner and both of us will be on the deed and loan. She’s claiming the 8k credit on her tax return. My question is if for any reason I need to moved to another state before the 3 years period and my sister will continue living in the house. Do we need to pay back the tax credit in full or part of it? How about if my name is not on the deed but on the loan? Thank you.
@Ann: I’d say that because your sister is claiming the credit on her return and staying in the house for at least three years, she shouldn’t need to return the credit just because you (might) move out.
Thanks Michael for you quick response.
What if I am the one who claims the 8K, then move to another state before the 3 years period? But my sister as a joint owner will still be using the house as her principle residence. I will still pay for my share of the mortgage and is not selling the house or converting it into a rental property. I was thinking to add my parents on the deed as well, and they will be living in the house. Please let me know.
@Ann: In that case, I’d say you’d have to pay back the credit – you’re the one who took the credit and, in your hypothetical case, you meet the criteria for a payback requirement. That you continue to pay for it is irrelevant since it won’t be your principal residence.
thank you michael for answering my other questions. well i have another. can i use the the credit towards the purchase of a home i would buy outright?
@leonard: You’re welcome. Although you have to buy the home first before requesting the credit, you do not have to take a mortgage on that home.
My mother lived in the same home owned by my parents for 41 years. My father passed away, she sold the house and moved in with me while house-hunting. She found a foreclosed home and passed papers in January 2009 and remained living with me while the house was redone. She started sleeping there off and on as work required, and hot the occupancy permit by June.
Does she qualify for anything?
She may qualify for the the $6,500 existing home buyer tax credit. Check it out.
I bought a house this year by myself but am married. Neither of us has owned a home previously. He is not on the mortgage or deed. We are filing married and separate. Since I have sole ownership do I qualify for the $8k?
My husband and I are co-buying a duplex with my sister. My sister does not qualify for the first time homebuyers credit but my husband and I do. Can we claim the full 8k credit since my sister can’t claim any of it?
We will be occupying the duplex, not using it as an income property.
@Jan: Yes.
@Kim: No, you’ll qualify for half, or up to $4,000.
Hello, I have a question for the first time home buying credit as well. It states you can NOT buy from a relative….what exactly does relative mean….does a step parent count? I read on a few website that u can buy from a step parent and its not considered a “close relative”… is this true?
Thanks
@Jaclyn: Yes. The definition of a close relative does not include a step-parent. Note that if your step-parent is married to your blood-parent, that workaround doesn’t apply.
I am married, and I purchased a house by myself. My husband’s name is not on the deed or mortgage. we file tax return as married file jointly. will I get the full 8000 credit if I meet all the other criteria?
one more condition. My husband and I are all first time buyer and our family income meet the limitation requirement.
@justforchild: Yes.
I purchased a house from the estate of my mother, we had an appraisal and paid full market value. Do I qualify for the credit?
@brett: Possibly. Haven’t personally dealt with that one yet. Suggest contacting the IRS. Good luck!
I am buying a house with my fiance on april 15. We are getting married may 15. I bought our house myself three years ago and she has never owned a home. Since she will be filing separately can she receive the full 8k?
@Adam: You won’t need to file separately. Provided that her income qualifies, she can immediately file an amended 2009 return (as a single woman) and claim the full credit.
My grandfather passed away in April 2008. My father inherited the house and we purchased it from him in November of 2009. Is there any way to still obtain the first time homebuyer credit? If not, what is the government’s reasoning behind this restriction? We are well below the income limits and meet all the other requirements.
@Carey: No, you can’t claim the credit as it is in direct violation of the “close relative” clause. What’s the reasoning? I try not to get int he heads of our government but I suspect it’s for fear that a lot of people who trade houses with Mom and Dad, collect $8,000, and it would do nothing to stimulate the housing market, the primary reason for the credit.
Thanks for your answer! I certainly understand avoiding fraud, but for those of us who saved hard for our down payment, bought a house, and plan to stay here 50 years, it stinks! They should at least allow you to appeal or file an exemption from that rule or something. Ugh!
I’m in a similar situation as Brett and Carey. My husband and I purchased our home from my mother – we had the appraisal and paid full market value. We did everything by the books, but to our dismay we found that we don’t qualify for the tax credit because of the ‘close relative’ restriction. I completely understand the protection of fraud, but have you found any exemptions/appeals for those of us who can show that we did everything by the books?
Hi Michael,
I recently saw the Extended Home Buyer credit info on the IRS web page:
http://www.irs.gov/newsroom/ar.....27,00.html
And it said there is a limit of $800,000 on the purchase price of the house. We bought our house in Sept. 2009, and we have an income of less than $75,000, so we qualify for the first-time home buyer credit under the rules I had read back in April 2009, for the regular (not extended) home buyer credit. However, now, on the IRS FAQ, it says that we are eligible, but our house is NOT! Now it says that a house must be below $800,000 purchase price to qualify, and it does not say that this new purchase price limitation (as I would expect) only applies to the extended credit program.
http://www.federalhousingtaxcredit.com/faq1.php#11
What’s going on? Was this $800,000 limit there all along, and I just missed it somehow? Or does it only apply to the “extended” program, and they just forgot to make that distinction on the web site FAQ?
I know this is a busy time for CPAs. Thanks for answering if you can.
-Anne in San Francisco
http://www.federalhousingtaxcredit.com/faq1.php#11
Hi!
Having so much trouble finding the answer to this question.
My fiance and I are buying a home, we will NOT be married at the time of a sale. Since he works full time and im a student/stay at home mom, we have gotten a loan in just his name.
HOWEVER, he previously has owned a home and does NOT qualify. Is there a way for me to get ON the loan/morgage for us to get the tax credit since i DO qualify?? What would I need to be on in order for myself to file?? Would I need to just be on the loan or the house deed?? And would I need an income to claim it? Thanks!
Hi Michael,
After much searching, I found my answer!
From the USA Today Web Site:
“The $800,000 cap also applies to first-time home buyers, but only those who purchase a home after Nov. 6. First-time home buyers who bought a home for more than $800,000 between Jan. 1 and Nov. 6 can still claim the credit, assuming they meet the other criteria, Meighan says.” (Bob Meighan, vice president at TurboTax, the tax software provider)
http://www.usatoday.com/money/.....edit_N.htm
Chart comparing the Extended Credit to the Original Credit.
http://www.usatoday.com/money/......htm#chart
So … we didn’t get duped. The house we bought for more than $800,000 will qualify for the credit, because we bought it in Sept. 2009 under the “old rules.” Thank goodness!
IRS definitely needs to fix its web site, however. (http://www.federalhousingtaxcredit.com/faq1.php#11) Right now the FAQ says:
What types of homes will qualify for the tax credit?
Any home that will be used as a principal residence will qualify for the credit, provided the home is purchased for a price less than or equal to $800,000. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
… The way it is written now, it doesn’t specify that the $800,000 cap is only for people in the Extended Program. Not good! At least we cleared it up here.
Thanks for your help!
Anne
@Rico: No, the law does not provide for an exception for transactions priced at fair market value. Sorry.
@Anne: Thank you for sharing your experience. I hope you have a huge down payment!
@Cait: Simply get on the deed at the time of purchase (be a purchaser). Contribute something, even a thousand dollars towards the down payment. The mortgage can be in your sweetie’s name. As long as he doesn’t claim the credit (he can’t), you can claim the whole thing on your last year (as a single individual) tax return by amending it. Done.
i lived in a house with my parents since 2003. they passed and i inherited the house in 2007. If I sell that house and buy a new one, do I meet the long time resident test, since I (i) own) and (ii) have lived there 5 of the last 8 years, or do i have to have both owned the house for the full five year period AND lived there for 5 of the 8?
I was going to be purchasing a home form my brother would this qualify for the tax credit
@jb: As I understand it, you must pass both tests, meaning you must have lived in and owned the home for at least five consecutive years.
@Don: Yes, since brothers are not excluded as related parties.
My niece purchased a home that was owned by her sister….
The IRS instructions say that she does not qualify if it is a lineal purchase (Parent to child or child to parent)spouse or grandparents.
I assume she can purchase from a sister. However, the IRS has denied her claim.
Can you help me understand what I am missing here?
@Gail: Either the IRS has made a mistake or she was disqualified for another reason. Suggest you contact the IRS to find out which.
Hi Michael, I cosigned a house with my brother in 2009 (and have never lived there). I just bought my own house a few weeks ago and would like to know if I can claim the tax credit?
@Mariana: Co-signing on a mortgage doesn’t even make you a part-owner so no issue there. If you also co-signed the deed, then you’re a part owner but if you have never lived there it wasn’t your principle residence, so you should be okay to take the credit on a different home you do buy and live in. (In effect the property you bought with your brother is your investment property.)
Thanks Michael. I did also cosign on the deed. I was just worried because when I bought my house the statement shows that I’m not a first time homebuyer (because of the cosigning, I guess). I’ve never paid for anything on my brother’s house or lived there, so hopefully I can get someone to amend my taxes. Thanks a lot!
I closed on my house in middle of Dec 2008. I claimed he tax credit that you had to pay back. My mother is now saying that I can take the other where I get the money back instead since it was revised. I was under the impression that the new act didnt take place until Jan 1 2009. Can I ammend my taxes from last year and change it to where i get the refund instead of paying it back?
@Tracy: Sorry, Mom’s wrong. You must repay.