Discussion:'first time home buyer'

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Discussion Forum Index --> Basic Tax Questions --> 'first time home buyer'


Discussion Forum Index --> Tax Questions --> 'first time home buyer'

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KSCPA (talk|edits) said:

26 July 2008
Anyone know where the best source is for me to read the new law designed to help the mortgage industry? I'm particularly interested in the definitions of 'first time home buyer.' I've read things that appear to differ in this area. For example, is a client a first time home buyer if he has owned a home but his spouse has not? If he has owned a home but not in the last three years?

Death&Taxes (talk|edits) said:

26 July 2008
Has it been signed.....? See the link to the House Committee reports at Discussion: What's it all about?

Uncle Sam (talk|edits) said:

27 July 2008
I don't have a question on "home buyer" definition - but I do have one on the credit?

What happens if you don't outlive the IRS on the 15 year payback rule and don't have a taxable estate?

Is the IRS going to recoup the "unpaid balance" on your final tax return?

GoalieEd (talk|edits) said:

27 July 2008
My understanding (and I could be wrong) is that the house and senate passed the same version of the bill and the president said he won't veto it, but he has not actually signed it at this point.

From reading a previous link here, my understanding is that if the taxpayer dies before repayment of the $7500 credit, the remainder is forgiven and not collected.

CrowJD (talk|edits) said:

27 July 2008
The definition of a first time homebuyer is interesting. If you don't own a principal residence for 3 years, you are considered a first time homebuyer, am I reading that right? Now, I guess these people can snap up the homes of their fellow citizens that have been foreclosed on so they themselves can get in line to be foreclosed on.

I've been making fun of these flippers and such, but the govt. has stacked the deck so in favor of speculation err "homeownership", that I guess you'd be a fool not to join the party. Let the fraud begin.

If you really want to help the country, don't tax the first $7,500.00 in interest income earned each year. Find some way to encourage people to save money, instead of encouraging people to ultimately get on a debt treadmill.

Riley2 (talk|edits) said:

28 July 2008
Uncle Sam, I believe that new Code Sec. 36 provides exceptions for death, divorce, or involuntary conversion.

CinSee (talk|edits) said:

28 July 2008
First time homeowner for the new bill is one who has not owned a personal residence for at least 3 years prior to purchasing the residence.. If married that applies to both. If you die, the balance of the credit is not recaptured.

Cotopop (talk|edits) said:

29 July 2008
Unless there has been a change from the House version there is no exception for recapture in case of divorce. The "transferee"(spouse continuing to reside in residence ) will be responsible for the remaining recapture.

Joanmcq (talk|edits) said:

30 July 2008
C'mon JD, don't be so cynical! Out here in foreclosureland, housing prices have dropped so far, the fiscally responsible can buy them again, and not risk foreclosure except for the usual reasons...unexpected death, disability, loss of job, etc, rather than buying more than you could afford. For the last few years (at least up til 2006) the fiscally responsible were SELLING and laughing their way to the bank, or sitting tight in their apartments.

Death&Taxes (talk|edits) said:

30 July 2008
Once you see the AGI limitations, and examine the fact that the credit is really an interest free loan to be paid back over 15 years, you begin to realize that the attraction will be to those who would rather buy, not rent, and that what could happen is that the same shoddy lending practices could begin again. Anyone really think that they will let this credit expire on July 1, 2009? And by the way, has anyone mentioned AMT ramifications since it does not offset AMT.

Riley2 (talk|edits) said:

30 July 2008
Actually, this credit is effective for both regular and AMT purposes. According to the Commitee reports, the credit is a refundable Subpart C credit. Thus, the credit will appear in the payments section of the Form 1040.

Death&Taxes (talk|edits) said:

30 July 2008
Then Kiplinger has it wrong again, for in the 7/25/08 newsletter it says it does not offset AMT. "It is refundable to the extent it exceeds the buyer's regular tax liability, but it does not offset the AMT." Or is it semantics? The House explanation says Refundable, but the DC Credit appears on Line 54, and the Committee makes mention of the DC credit in getting a handle on this new credit. Kiplinger must mean that you might pay AMT but still receive the refundable credit, just not as much.

Kathyt (talk|edits) said:

30 July 2008
Would a duplex qualify for this if one side of it was the principal residence of the first time home buyer, or would renting the other side of it disqualify it?

Riley2 (talk|edits) said:

31 July 2008
The new Sec. 36 credit is refundable. However, the DC Homebuyer credit is a nonrefundable personal credit which cannot be used against the Alternative Minimum Tax.

I see all sorts of room for abuse here. For example, if a taxpayer gives his terminally ill mother the money to buy a home, the taxpayer inherits both the home and the $7,500 when his mother passes away, and the probate sale would not trigger a credit recapture.

Riley2 (talk|edits) said:

31 July 2008
KathyT, I see no reason why there would be a problem with renting one side of the duplex as long as the other side was a principal residence of the taxpayer.

Mebekris (talk|edits) said:

4 August 2008
Any thoughts on this? I have a client who has been separated from her husband for 2 years. Her husband owns a home (bought before they were married), but my client's name was never on the deed. My client bought a home (in her name only) in April of 2008. The divorce will be final before the end of 2008, so the filing status will be HOH for 2008. Does she qualify for the tax credit as a first time homebuyer even though they were legally married when she bought the home?

Cotopop (talk|edits) said:

5 August 2008
I believe your client is eligible for the credit based on the definition of a first time homebuyer; " A taxpayer is considered a first time homebuyer if such individual has no ownership interest in a principal residence in teh United States during the 3 year period prior to the purchase of the home to which the credit applies"

Since your client had no ownership in the ex husbands personal residence (not on title ) you should be OK .There is no issue with the fact that in April when home was purchased she was still married. Hopefully escrow shows a closing date of April 9 or beyond .

Marital status at date of purchase (Aug 5 and 6 posts)

Riley2 (talk|edits) said:

5 August 2008
Technically, filing status at the year-end is irrelevant. Instead, the statute refers to marital status on the date of purchase. See statute below.

(1) First-time homebuyer. The term “first-time homebuyer” means any individual if such individual (and if married, such individual's spouse) had no present ownership interest in a principal residence during the 3-year period ending on the date of the purchase of the principal residence to which this section applies.

Cotopop (talk|edits) said:

5 August 2008
Riley ,

Just so I'm clear on your comment are you suggesting that her maximum credit will be $3,750 rather than $7,500 because on the day of purchase (April, 2008 ) she was separated ? My understanding is that marital status on the 2008 return will dictate .(CCH Tax Briefing)

Riley2 (talk|edits) said:

6 August 2008
For purposes of determining whether she was a first-time homebuyer, we need to look at her marital status on the date of purchase.

For purposes of determining whether the $3,750 or $7,500 limit applies, we need to look at filing status on the return for which the credit was claimed.

Thus, the ideal situation would be if she were to buy the home the day after her divorce was final, in which case she would qualify for a $7,500 refundable credit (assuming she does not remarry).

Cotopop (talk|edits) said:

6 August 2008
So filing status at year-end is relevant and she is eligible for $7,500.

Riley2 (talk|edits) said:

6 August 2008
My original comment was that filing status at year end is irrelevant for purposes of determining first-time home-buyer status. And no, she does not qualify for either the $3,750 credit or $7,500 credit.

Cotopop (talk|edits) said:

6 August 2008
Thanks Riley the light finally came on. I understand your interpretation and conclusion that in this specific case, based on a strict reading of the legislative text on page 566 , the taxpayer is not eligible.Personally I think the jury is still out and we will have to wait until we see the final tax code.

Riley2 (talk|edits) said:

7 August 2008
I reproduced the final tax code in my earlier post.

Pink Pearl (talk|edits) said:

5 January 2009
Another thought on this for clients that qualify...If home is sold for profit the loan will be repaid but I assume "improvements" to home similar to the old 121 rules will apply so new home buyers need to keep track of these for future use???? I have had 4 calls on this already this month...

Laticiaw (talk|edits) said:

5 January 2009
Okay -- getting a little personal here...just to clarify things...I went through a divorce in the past year. I separated in June of 07. He refused to leave the House (long story -- but he has a mental condition) and then refused to make payments on the house and the house was forclosed on -- The house was forclosed on in Jan. of last year. As far as I know no one is interested in buying the house because to cover the bank loan the value of the home is above the market value right now. So the title to the home the bank has not transferred (looked on the data site for my state and the title for the land for tax purposes is still in our name). Do I have to wait three years from the sale date of the home by the bank to another buyer or do I have to wait to three years from the forclosure date? Point blank, I didn't want to loose the house, but because I was forced to move out, I had to sign a lease and by the time I found out that he was behind in the payments (I made a call to the bank after he made some threats about not paying and found out that he hadn't been paying), I was in this lease and didn't want to ruin my credit further. Also, by the time I had found out, the payments were so far behind I don't know that I could have caught them up and there was no guarentee that he would have moved out...in fact at one point he wanted me and my boyfriend to catch him up so that he could still reside there...

Riley2 (talk|edits) said:

5 January 2009
Since the credit expires on June 30 of this year, I don't see how you will qualify for this credit.

Topher79 (talk|edits) said:

8 January 2009
Riley2 so glad you clarified this. I'm pretty sure my client will as well but I want to run this couple's scenario by you first.

He had never owned a home before. She owned her own home. In August 2008 they bought a home together, keep in mind they are unmarried at this point. In Sept 2008 they entered in a common law marriage (recognized by this particular state). So filing status would be married at year end but he's still eligible to claim the 7,500 right(since they weren't married at the time of purchase)? They would just have to file seperately? If they file seperately can he only get $3,750? Why wouldn't he be entitled to all of it since she isn't eligible for any of it?

Thanks

LoriS (talk|edits) said:

19 February 2009
If a person was renting for the past four years, while going through divorce, owned a home jointly but did not live in it during these four years, waiting to settle divorce and eventually turned over the title to the spouse - would the renter-spouse be a first-time homeowner if they purchased now? I would think yes, being that I thought I saw where you are allowed to own a rental home or a vacation home and still qualify, but I'm not sure.

Riley2 (talk|edits) said:

19 February 2009
Yes, since the home was not a principal residence located in the United States, the client is a first-time homebuyer.

Aztaxer (talk|edits) said:

20 February 2009
I have a client who has never owned a home, but his ex-wife has. They were divorced in April 2008, and he has just bought a first home and closed two days ago. He was never on any loan documentation, and she bought the home prior to their meeting and marriage. It is my understanding that he meets the qualification as a FTHB, am I correct?

Riley2 (talk|edits) said:

20 February 2009
Yes.

Taxbeing (talk|edits) said:

20 February 2009
I think this has been answered but just want clarification. A taxpayer who has never owned a home purchases a home in May of 2008. They marry in June of 2008 and the spouse has owned a residence. The taxpayer who purchased the home is eligible for the first-time homebuyer credit, but they must file seperately in order to claim it? Is that correct? Sorry...just trying to make sure I handle this properly.

EZTAX (talk|edits) said:

21 February 2009
Going back to LoriS 2/19/09 situation. I have a client with a similar situation. My concern it this. He sold his 1/2 of the home to the ex in 07. He had moved out of it in 04. He used the 121 rules and the exception for divorced taxpayers that continue to own the home they have moved out of, to exlcude the gain. He purchased a new home this year.

On one hand, he has been a renter since 02 so this qualifies for the first time homebuyer credit. On the other hand, he used the 121 exclusion in 07 so he does not.

Thoughts???

Mobile homes

Fsteincpa (talk|edits) said:

21 February 2009
Ok, I am pretty sure the answer is no. But, client just came in and bought new house. They lived in a double wide prior to that. Double wides get registered with the DMV and they paid lot rent.

FTHB or no? And yes, cats have died because of this question.

Ben2bnea (talk|edits) said:

21 February 2009
FTHB or not?

TP is engaged on 1/1/08, he has never owned a home but she currently does. They marry 5/24/08, they live in her place (with it on the market) until 10/1/08 when a renter moves in, they move out, buy a place together on 11/08. He is not a FTHB since he will file a MFJ return with her, and she owns a prior property that is now a rental. (rental is non-factor)

Wanted to make sure I got it. And let him know he is screwed.

Kevinh5 (talk|edits) said:

21 February 2009
that was in your Congratulations on the Wedding card, wasn't it?

EZTAX (talk|edits) said:

22 February 2009
Fsteincpa - I would agree with you - no credit since a double wide is considered a home for 121.

LisaCPA1 (talk|edits) said:

3 April 2009
Husband and wife have been married for many years, but the husband was the only one on the deed and the wife has never been a homeowner. Husband and wife are both listed on the mortgage. Does the wife qualify for 1/2 of the credit?

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