The IRS released a notice recently concerning an obvious contradiction:
- The deadline to purchase a home and potentially qualify for the 2009 first time home buyer tax credit is November 30, 2009.
- You can claim this $8,000 refundable tax credit on your 2008 tax return.
- Your 2008 tax return is due April 15, 2009.
You: So how can I claim a credit on my 2008 tax return if I haven’t purchased a home by April 15?
Here are your options:
- Extend your tax return. File Form 4868 and automatically receive a six-month extension to file. Note, this is not an extension of time to pay your taxes if you think you’ll owe. Then again, will you owe after factoring in that $8,000 tax credit?
- File now. Amend later. Another option is to file your return on time and then file an amendment (using Form 1040X) after you close on your home. Presto: up to $8,000 back in your pockets!
- Claim it in 2009. You don’t have to take the first time home buyer credit in 2008. Instead, you can choose to take it in 2009. For some people, this may actually be better.
You: But what about the time value of money? Better to receive a dollar today (or 8,000 of them!) than a dollar next year, right?
Absolutely. However, for some people the choice may be $5,000 today or $8,000 in a year.
You: How come?
If your income is too high in 2008 to receive the full credit and you think you might make less money in 2009, it may pay to wait to take the credit until then. Remember, the income limits for the full credit are $75,000 MAGI if filing as a single person and $150,000 if married, filing jointly.
You: What if I already filed my 2008 tax return, subsequently buy my first home before December 1, and want to take the credit on my 2008 tax return? Can I still do that?
Absolutely. See option number two above: amend.
Other related reading:
- All about the 2009 First Time Home Buyer Credit (tons of Q & A)
- If you purchased a home in 2008, read this post about the 2008 version of the first time home buyer credit. (plenty of Q & A there too)
- Curious as to my thoughts about the housing market? Read Is it time to buy a home yet where you live?
Or, just ask a question or make a comment below. Good luck!
Update: Here are the new rules for those who buy their homes after November 6, 2009.
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@Susan: If you inherit a home and you then live in that home, you’re not qualified for the first time home buyer tax credit. Unfortunately, I sense that’s what happened in your case. Sorry. You’re only out would be if your mobile home was actually an RV (with a motor). Then you would still qualify.
I am single but am over the income limits for the credit. My girlfriend is not over the income limits. We have a kid together (not sure if that is relevant) It is my understanding that she is eligible for the credit only if her name is on the title. Is that true? Does she need to be on the title for this house to be considered her ‘principal residence’? If her name is required, does it need to be on the title for 3 years in order not to have to repay the credit? I’m trying to confirm that our only option to put her name on the title to get the credit? The loan will only be in my name.
@Josh: Of course the person claiming to be a first time home buyer must actually buy a home. If your girlfriend isn’t on the deed, she doesn’t own a home. In addition, she must also live in the home. Yes, the three years will apply to both her living in the home and owning it.
As a follow up…I heard the tax credit is most likely to be extended. Contracts must be signed by April 30, 2010 and sales must close by June 30, 2010. It also looks to have changed from a limit of 75k to 125k per individual and 250k for married couples. Can you comment on this? What if I purchase a home prior to this bill being passed? Could I still file for the credit? Any thoughts? I know nothing is official yet…
@Josh: As you implied, nothing is official yet. No bill has passed Congress. It’s impossible to predict with accuracy how the final law will read. I’ve seen many laws passed which apply only to transactions which occur after date of passage, those which apply retroactively and those only applicable to a future date.
Do i need to send my 2008 1040 form along with 1040x back to the IRS office if i want to amend my 2008 return?
@Carmen: Yes, include the 2008 Form 10401. However, you don’t need to send in any additional forms or schedule you originally filed.
Me and my girlfriend bought a house back in may \’09 I owned a mobile home then. She has never owned a home before both of our name are on the the mortgage and the tax deed should this be a problem for the first time home buyer credit if we only do and amendment in her name?
@Scott: Since you’re not married to your girlfriend, your ownership of a mobile home is irrelevant. She can claim the credit on her return.
Hey Mike, now that the first time home buyers tax credit has been extended and the income allowance has been increased, how come it doesn’t apply to those who bought under the original guidelines for that credit? I thought it was being “extended” not re-written to be exclusionary to those under the credit to begin with? Doesn’t seem fair, I assume there are many out there with a similar issue/complaint??
Thanks
@Jeff: Just wait until you see my upcoming November 13 post. I think this is what happens when you try to get 535 people, each receiving hundreds or thousands of constituent contacts, each with their own opinion, each trying to get re-elected, to agree on something.
No matter what they do someone’s going to be upset. Ironically, the larger the group they include, the more upset those excluded are likely to feel.
Hey Mike! Thanks for the response, I’ll definitely be looking forward to your November 13th post!
That’s equivalent to opening your store for BlackFriday sales to get everyone to show up 10 hours early for the best deals, but then deciding you are going to keep the store open later and offer better deals later that night for anyone else. I don’t know, perhaps I am bias on this, but logically doesn’t seem fair to make that decision after the fact.
Thanks again!
J
Mike, I was wondering if my wife will still qualify for the home buyers credit. I owned a home in the past 3 years, but we purchased the home in just my wife’s name with just her assets. Will she qualify for 1/2 of the credit?
@Ian: No. If you’re disqualified, then so is your wife. Sorry.
My husband and I purchased our first home from my in-laws in Aug 2009. I did not see any guidelines saying that this purchase would not qualify until the updates in Nov 2009.. Does this disqualify us?
@Amanda: Purchases from in-laws have always been excluded so, yes, you’re disqualified. Sorry.
Girlfriend, kids, and I lived in same residence for over 5 years. Mortgage and house under my name. Can girlfriend buy house off me and qualify for the $8000 first time homebuyers credit. She never owned a home? We will all stay in the same home.
@A.J. While clearly not the intention of the law, I don’t see any prohibitions of what you propose.
I bought our home in 2oo4..Never got htr first time home buyer credit on taxes..would i qualify for the 8000 credit on my taxes??
@Sue: No.
If we bought a home from my husbands uncle in 2009 will this qualify for the credit or is an uncle considered direct family member????
i inherited a home before marriage,and my name is on the deed, but my husband’s is not. My husband and I would like to buy a house. Can we qualify for first time home buyer since we never had a home loan in our name? Can my husband apply for the loan and qualify or do I mess things up with the inheritance?
@Megan: An uncle is not considered a related party for purposes of this credit, so you’ll qualify.
@Ray: Because you own a home, both you and your husband are excluded from the first time homebuyer credit. That you acquired it by inheritance is not relevant. (I’m assuming you’re living in the home. If not, ignore previous comment, you qualify.)
thank you! We were about to make a big mistake!
@Ray: Happy to help. Have you lived in your home at least five years? If so, you might qualify for the most recent version of the homebuyer credit.
If I puchase the home all cash, do I still qualify?
@Gary: You’re the first Gary’s to post here besides Gary. Welcome aboard. Taking or not taking a mortgage does not affect your qualification for the credit.
Mike, 2 years ago when I was single, I purchased the house and due to the financial condition I had to forclosed that one. After I got married last year, my wife purchased the house (first time buyer), will she qualify for the first time home buyer credit? If not, can she file for married separte to qualify 1/2 of it? Thank you in advace.
@John: Nope, sorry, your wife won’t qualify regardless of how she files. If she had purchased the house before you got married, she would have qualified.
I live in a home that my mom gave as a gift to my brother and myself. I have lived in this residence for over ten years. I am planning to buy a new home soon. Will I qualify for the “first time credit” (full amount) since this will actually be the first time that I will actually purchase a home?
@Louis: No, as you are considered a homeowner even if you didn’t buy the home. As you properly imply, however, you may qualify for the reduced $6,500 credit.
I purchased a home in 9/2008 and claimed the first time homebuyer tax credit for $7500 on my 2008 tax return. In late 2009 I put in a loan request to refinance with a different lender and add my girlfriend to the mortgage and title. According to the indenture statement, I was the seller and both her and I were the buyers. Would she be able to claim all or even part of the 2009 tax credit?
I called the IRS directly (and waited forever) about this, and they could only tell me that if it was “considered” a purchase, then she would be fine, but if it was “considered” a refinance, she would not qualify. Unfortunately, she couldn’t help me determine what the official difference is between a refinance and a purchase for tax reasons. Imagine that.
@Ryan: IMO, since you’re not selling the home to her, she’s not buying it.
My husband purchased a home in 2004 and we still have the home in Tucson AZ. It is being rented out. We have relocated to Albuquerque and are using my VA to buy a home. Do I qualify as a first time home buyer since the other home was not in my name and I have never bought a home before.
@Bridgit: Your first time home buyer status is the same as your husband’s, since you are still married. If he converted his home to a rental property more than three years before you buy a home, you’ll be considered a first time home buyer.
My mom got the credit on her 2008 tax return and in 2009 she bought another home for my sister. If my mom buys pays for the house puts her name and my sisters name on the deed can my sister claim the credit just for having her mane on the deed? Or if there is a purchase contract between my mom and sister would my sister qualify? I have heard that you can not claim the credit if you buy from a family member?
@Jenni: If your sister bought the house with her mother, that would have been fine – your sister could have claimed the credit if she lived in the home. But if your Mom bought the home in her own name and your sister didn’t contribute or go on the deed originally, she’s out of luck. You are correct in that your sister buying the home from her mother would not work.