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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My friend amended her 2008 tax return so that she could get the tax credit to use to pay off some debt on her credit report. She needed to get her score up to par to qualify to purchase a home and this is what the mortgage broker recommended she do. But now, her score is still not where they want it to be. If she is unable to purchase a home by the deadline, what will this do to her tax return for 2009. How much of this credit will she be expected to pay back and how long will they give her to do this??
@Shannon: What your friend did was against the rules. She was not supposed to claim the credit before buying a home. She needs to amend her 2008 return at one and pay back all of the money she received.
I am closing on a home today, 9/8/09. I have not owned a home in over three years, but my step dad is cosigning for me on the loan. He isn’t going to live there, he is just helping me get the loan. My problem is he already owns a home. I wanted to know if I still qualify for the tax credit seeing he is never going to live there, he is just cosigning for me? Thanks
@Anthony: Congratulations! No problem, you’ll qualify for the credit. That your step-dad is co-signing is not a problem.
So, are you a Browns fan?
Actually, I am a Patriots fan. I just don\\\’t like the Steelers.
Me too (although I’m more pro-Patriots than anti-Steelers).
Hello Michael. Thank you for answering all these questions on this site. Here is our simple situation: My husband bought a home in 2003. He still owns it and has rented it out for the last four years to renters. In those last 4 years, we have both lived in a home we DO NOT own. Since we are married and plan to buy a home (closing date is Oct 10), would his owning that other home DISQUALIFY us? Even if we don’t live there? The IRS tax form 5405 says:
Who Can Claim the Credit
In general, you can claim the credit if you are a first-time homebuyer. You are considered a first-time homebuyer if:
? You purchased your main home located in the United States after April 8, 2008, and before December 1, 2009.
? You (and your spouse if married) did not own any other main home during the 3-year period ending on the date of purchase.
If you constructed your main home, you are treated as having purchased it on the date you first occupied it.
Main home. Your main home is the one you live in most of the time. It can be a house, houseboat, housetrailer, cooperative apartment, condominium, or other type of residence.
…so this implies that if we haven’t LIVED in the home that he OWNS, we CAN claim this $8000 credit. Is that true?
thank you very much
angela
(PART 2 from above) oh yeah, we have only been married for one year. He bought that home in 2003 long before he met me. I wonder how/if the IRS will audit this. This whole $8000 tax credit has so many grey areas. How are we to prove that the home has been occupied by renters and NOT us? It has been on an rather informal month-to-month type lease with his friends. I guess we could type up retroactive documents and have these friends sign old lease forms for proof but in short…I wonder if we qualify.
thanks again!!!
After reading all the posts last night on a differnt site. I called the IRS myself once more. I closed on my new home June 30, 2009. I had my amended taxes done July 1, 2009 and sent it out that very day. The IRS recieved it on July 6,2009. So I am now approaching 10 weeks out. My tax gal told me 6-8 weeks, then the first time I called the IRS it was 8-12 weeks and now the past few times I called the IRS I have been told 12-16 weeks (even last night I was told this by the IRS Rep.). When I seen that some of the folks posted how they have been waiting for their checks from their amended returns mailed back in April and May 2009 I became very alarmed. When I called the IRS last night, I mentioned to the gentleman that I had seen a bunch of negitive posts online about people waiting weeks and weeks to five months. Basically if the guy was reading off a script, I through him off with my questions….He also told me that when they recieve your return, just your general info. gets entered into their computer system then it\’s assigned to someone else that puts it in a pile and when they get to it they get to it….The 4 weeks, 6 weeks is bull, it\’s just like the \
@Angela Jenkins: You qualify. Owning an investment property does not exclude you (or him). Of course he should be reporting his rental income and expenses – but that has nothing to do with the credit or this blog post!
@concerned: yes, it’s been taking a long time. For those who have not yet filed, include the HUD closing form. Apparently that makes it go (somewhat) faster.
Just an FYI for anyone still waiting on their home credit. I filed my ammended return on May 15th and it was received by the IRS, suppossedly, on May 21st. To this date, I still have not received any letter or phone call from the IRS updating me on forms they may need from me, what the status of my credit is, etc. Also, I DID NOT send my HUD statement along with the amended return. Maybe this is slowing it down, but they have not come back and asked me for it yet either. I will just keep patiently waiting……
Seems to me most like a lot of people on this site are looking for loopholes for the tax credit. It would seem that is why it is taking so long for all of us bought our homes legitimately are having to wait so long. They have to weed through everyone who is trying to trick them.
And why would I need a HUD closing form? BTW, I just called my tax lady. She’s going to check into if we were suppose to put a copy of our house closing statement along with the amended tax return when mailing it out to the IRS. She said, normally no. But she will do some checking for me…
I have been searching for an answer to my question, with no avail, hoping you can help!
I “purchased” a home in October of 2004 under a land contract. The title was not put in my name and I was not to make updates to the home without permission of the title holder according to the contract. In February of 2009 I took steps to purchase the home myself…have the title put into my name, etc. Would I qualify for the 2009 first time home buyer tax credit?
Thank you for any input!
@Stephanie: That’s because you’re asking a tough question. Not to fear: I think I can help you out. Here’s what you have to ask yourself: “At what stage did you start to deal with the “benefits and burdens” of the home. If back in 2004, then I don’t think you’ll qualify. If in 2009, I think you will.
Here’s my reasoning, from the IRS web site:
Q. Can a taxpayer claim the first-time homebuyer credit if the purchase is pursuant to a seller financing arrangement (for example, a contract for deed, installment land sale contract, or long-term land contract), and the seller retains legal title to secure the taxpayer’s payment obligations?
A. If the taxpayer obtains the “benefits and burdens” of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property. (New 7/2/09)
Good luck!
Thanks. I had seen that information, but I don’t understand what all that means. So I guess I’m still at square 1!
Hello,
I have been married for 2 years. My wife bought a condo before we got married. Together we just bought a house in September 2009. This is my first home, but her second. I am still not on the title or mortgage of her first property. We are both on the title and mortgage of this property, which is our primary residence.
Am i eligible for any part of the tax credit?
@Sam Harp: Assuming that your wife has owned and lived in her condo at any time during the past three years, then you will not qualify.
Once you’re married, both spouses must qualify for the credit. That you are not on the mortgage/deed of a previous home she owned/owns is irrelevant.
I knew I would be buying a home this fall, so I filed an extension with the intent of filing after I purchased the home. I closed on September 3, then filed my return. I was supposed to get my refund today and didn\’t, so I called the IRS and found out I am under review. I was wondering if I could send my HUD statement to them now rather than waiting until they decide to request it. Has anyone else done this?
My fiance bought his first house in September, 2009 and earns too much for the tax credit. Combined, we do not exceed 150,000, though. Would we have to be married by the end of the year to earn the credit? Or be married at the time of buying the house?
@Rebecca: You would have to be married before the end of the year, not necessarily before the purchase of the home.
I want to start the process of buying a house. Now I have just been asked by my sister if I can co-signed for her. So I would like to know how would that affect my process? Would I loose my first time homebuyer credit?
@Janina: Simply co-signing for someone else’s home (that you never live in) should not affect your ability to qualify for the first time home buyer tax credit. On the other hand, it may very well affect your ability to access financing since you’ll be on the hook for one mortgage already.
Hi,
I was wondering if I would apply for the first time home buyer tax credit and receive the $8000 credit, and decide in the end not to purchase a home (a) will i have to return all the $8000 (b) pay it back on my taxes for the next 15 years or (c) keep the money and purchase a home later. Reason for this question is we got the money and my hubbie job moved us to another state and we did not purchase the home in that state but hopefully in the relocation state.
thank you very much
@janie: You’re not permitted to claim the credit until you’ve purchased a home.
My mom purchased a home in 2006, she put me in the deed of the house for legal reasons, i have been staying with my mom and paying her rent , i am in the process of buying my first home will i qualify for the $8000 credit?
And let me had i did not contribute any money on buying this home and i have never claimed it in my taxes.. thanks
@ALMA: Tough one. Technically, you’ve been on the deed of a home you live in – the definition of living in your principal residence. That you did not claim it on your taxes doesn’t help your case. That you paid rent is notable, but I am not sure it gets you in the clear. My strong advice is to reach out to the IRS directly.
If the house I purchased in 2009 is my first and I have a paying tenant living there with me:
1) How do I properly account for that rent/lease income and what are the tax implications?
2) Does living at the house as my primary residence and having a tenant disqualify me from the $8000 tax credit?
Thanks,
Al
@Albi: Regarding number one, they are extensive and way beyond the scope of this post. Check out the IRS web site instructions to Schedule E. Visit: http://www.irs.gov
AS to number two, no you’re not disqualified. Enjoy the credit!
thanks for that quick reply, one more question for you if i were to remove my name from the deed will that help me out ?
@ALMA: Not likely since, it’s been on there during the last three years.
@Michael – Sounds great!
I was looking at form 5405 and was confused as to what category I fell into. The house is certainly my primary/principle residence, but I was confused if using it as a way to generate income with a paying tenant it would be considered a business or rental property. I can more than squeak by making house payments myself, so I wouldn’t claim a loss if I had no renters…
Sorry to be a bit paranoid, but where can I read and discern for myself that I’m eligible for the tax credit? It must be in Schedule E, huh? I’m trying to get a hold of someone at the IRS, but am getting the runaround.
BTW – great blog/site! Just came upon it in the last week.
Thanks again,
Al
I am trying to close on my house by the end of November. My credit score isn’t where the bank wants it to be. Is there anything that i can do to show i am giving effort to close by the deadline? Is there some type of extended period i can file for? Thanks Dee
My dad owns the house that I am going to buy. Obviously I cant qualify for the loan if I buy from him. What if I buy from his company? Will that work?
@Dee: Beyond the scope of this blog. Suggest you engage a CPA, one that is comfortable being aggressive (and fast) too!
My husband and I bought my parents home last month. Is there any way to prove it was a legit sale in order to get the tax credit? Or, can we file seperately and he can claim the house for the credit? Or, is my husband eligible for half of the credit since they are my parents? I am just so frustrated cause I now have a $200,000 morgage and I can’t believe that we can’t get the credit…. Thanks in advance for anyones help with this issue
@Amanda: There is actually a very simple answer to your question: No, you don’t qualify. The facts you describe (purchasing a home from a parent) specifically exclude you from claiming the credit. Sorry.
Can we claim the tax credit if we get a contract for lease option to buy?
@Susan: Only if you will get the title prior to December 1.
I’m recently divorced, but while I was married my ex bought a home at it was soley in his name, we were seperated for about 3 1/2 years and the home was his so I lived at a different residence. In our divorce decree it states pretty much whatever is in his name is his, whats in my name is mine. Would I still qualify for the tax credit, since I havent lived in the home nor have any rights to it either by my name on the deed nor in our divorce decree?
@Sheila: If you didn’t live in the home your ex-husband owns during the last three years, you’ll qualify. If you did live there at any point during the last three years, you won’t qualify.
Hi Michael,
First I want to thank you for facilitating this site. It has been a wealth of useful information regarding the 2009 Tax Credit. You may have answered this scenario already, so please forgive me if it is repetitive, but here it goes:
I purchased and closed on my 1st home in August of this year (2009). As it stands, I look to make close to 93K this year and I made even more than that last year so I cannot amend for 2008. My fiancé has never owned a home either and makes a lot less money than I do. Her name is not on the house right now, but we are considering getting married before 2010 to take advantage of the joint filing which would put us well under the 150K max limit and therefore able to receive the full 8000 tax credit. My question is, how important is being married before 2010 as far as being able to receive the full credit? Do we need to be married before the end of the year or before we file our taxes? The reason I ask is because we may not be getting married until early 2010, but would be happy to push it up to be able to take advantage of the full credit.
I appreciate your response in advance, thank you!
je
@JE: your filing status on your tax return is based on your marital status as of December 31. Therefore, in order to be considered married for 2009, you need to be married by December 31, 2009. If you wait until 1/1/10 or later, you will have to file as a single individual for 2009.
Here comes the bride. . .
Hi, I am buying a house from my brother. We close Nov. 15th 2009 do I quilify since I am buying a house from my brother? This will be my first time buying a home.
@tiffany: Brother is not considered a close relative for the purposes of the credit. which includes your spouse, parent, grandparent, child or grandchild. You should be good to go.
According to the IRS, my return is being reviewed. This just happened a few days ago so I have not recieved a letter from them. Although when I do I want to be prepared since my home was not through a bank or mortgage company. I purchased my home from an individual who owner financed me with nothing down. I have a \
I plan on closing on my house November 15, 2009. Once I close on the house would it be too late to amend my return or should I just wait until I file my 2009 taxes? I initially filed through turbo tax and I don’t see where I would be able to amend my taxes through them. I would probably have to pay a tax preparer to amend them.
@Lisa: No, it is not too late to amend your return. You have three years from when you filed it or April 15, 2009, whichever is later. So, you have at least until April 15, 2012 to amend. I can’t speak to specific software, but I can tell you it’s as simple as going to the IRS web site and printing out the form and instructions to Forms 1040X and 5405. Include your HUD closing statement and you should be good to go. Congrats!
My husband and I have rented a mobile home from my parents for years. In May of 08 it was willed to me. In May of 09 we had the home moved and began the building process. We were told by everyone (builder and banker) that we would qualify for the tax credit. I reviewed all the sites to make sure. They all noted that buying from close relative and having home willed did not count so with others telling us and the information I read I gathered that we qualified. Now I see new question/answers that lead me to believe we don’t. What do you think?
It’s frustrating to hear first time homebuyer credit but not qualify if you are technically a firt time homebuyer.
HELP!