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.
Loading ...
Question,
My brother and I purchased a home in March 2009, My brother had better credit than I did and therefore qualified for a lower mortgage rate on the house. I put 50,000 down on the house and so did he. We have a joint-tenents contract as well as a closing statement with both our names on it as owners. My brother makes too much money to claim the first-time home buyer credit but I dont. What are my options for the credit.
@Jeff: You can claim the whole thing though, I suggest in the spirit of brotherly harmony, you at least take him out to dinner.
The title to my mother’s house was transferred to myself and my two sisters decades ago. My mother still lives alone in the house which is in another state that I live in, so it has never been my primary residence the previous three years. Do I qualify as a first time buyer for the California and federal tax credits?
@Ken: Did you buy a house?
Yes, I’m in the process of buying a condo; escrow is supposed to close today.
I should add that I’ve been renting my entire life and that I’ve never purchased a condo or house before. Also, a “first time home buyer” as defined on the Federal form is, “someone who has not owned a principal residence during the three-year period prior to the purchase”, while the California State form says, “any individual who did not have an ownership interest in a principal residence, either in or out of California, during the preceding 3 year period”.
@Ken: Assuming you had a binding contract before May 1, you’ll qualify for the federal credit. I can’t comment about California, sorry.
My realtor postponed the close of escrow so that I would qualify–timewise–for both the federal and state tax credits. What I’ve been uncertain about was whether I am considered a “first time home buyer” as defined on the Federal and State tax credit forms. I thought all was lost this past weekend after learning from my older sister that she had transferred the title of my mother’s house to me and my two sisters, but with your help I think that it is worth my while to consult a real estate lawyer.
@Ken: Consider calling the CA DOR for help there – free.
i recently sent in my HUD 1 and 1040X, didnt figure out until today that i didnt attach form 5405. What can i do?
@Shanae: Bummer. I’d wait until you undoubtedly receive correspondence from the IRS. At that point, you can resubmit with your Form 5405. If you’re entitled to the credit, you’ll still get it – eventually.
We bought our house in August of 2009, we received our $8,000 tax credit. Now the house we have always loved is for sale and we are thinking about buying it. It hasn\’t even been a year since we bought our first home, and I am not for sure if we will have to repay the 8,000 back because some websites say we might not have too, but they are not specific on the circumstances??
@Ian: This is very straightforward. If you sell your home because you like something else more within three years of purchasing the home for which you got the credit, you have to repay the credit you received when you file your 2010 tax return.
If i did not sign the papers for my house until June 2010, do i get any kind of tax credit?
@Dustin: No, unless you were in the military.
We bought a home in CA. we started escrow in april 28 2009 and closed july 23 2009. Are we eligible for any kind of credit?
@ Stan: If you meet the requirements, yes. The original article above lists the requirements. You can amend your return until April 15, 2013.