Discussion:First Time Home Buyer Tax Credit

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Discussion Forum Index --> Basic Tax Questions --> First Time Home Buyer Tax Credit


Discussion Forum Index --> Tax Questions --> First Time Home Buyer Tax Credit

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Actionbsns (talk|edits) said:

15 September 2008
This weekend my son asked me about a $7500 first time home buyer tax credit that is supposed to show up on the 1040, but then it gets repaid over ten years. He was wondering how it works and what is the theory behind it being helpfull. In so many areas of the country, $7500 is not going to be terribly helpfull to a homebuyer. Anyone else heard of this credit and if so, what are the details and where can I go to read more about it?

Ksnoopytax (talk|edits) said:

15 September 2008
Copyrighted info from RIA removed, it was basically just a plain-language recap of Sec 36.

As for your questions, the $7,500 is basically an interest free loan. It has to be paid back and is subject to recapture if you sell the house. However...only to the extent a gain is recognized on the house. Who knows in this housing market...

Blrgcpa (talk|edits) said:

15 September 2008
The pay back is $500/year for 15 years.

Actionbsns (talk|edits) said:

15 September 2008
How are they going to get paid back? Will they set up a note or just take it from prospective refunds? I haven't seen a refund check in about 30 years. What is the benefit of this supposed to be? I wonder how many people will actually take advantage of it. It seems rather useless to me.

Riley2 (talk|edits) said:

16 September 2008
It is an interest-free loan that can be forgiven if the taxpayer dies.

The taxpayer will be required to file a return each year to report the recapture tax.

Kirthe (talk|edits) said:

17 September 2008
Getting up to a $7500 loan, paying it back over 15 years with 'zero finance charge'.

Is it helpful? Maybe the new place needs electrical work, plumbing, a new kitchen. Sounds like a great deal...what credit cards could offer that?

Michaelstar (talk|edits) said:

17 September 2008
Action - here is a link to IRS IR-2008-106 for additional info on your question.

Tax Credit to Aid First-Time Homebuyers

http://www.irs.gov/newsroom/article/0,,id=186831,00.html

Aaronjames (talk|edits) said:

26 December 2008
I'm in the Navy and recently purchased a home. I am expecting to get orders to a new location within six months. Would this qualify as an "involuntary conversion" from me using my current home as my main home since I'll be under orders? If so, what kind of special rules would apply?

I've done a little research and can't really find anything -- if someone could point me in the right direction, I would greatly appreciate it!

Oldcorps1947 (talk|edits) said:

26 December 2008
The following link may be helpful

http://www.federalhousingtaxcredit.com/faq.php

Activomate (talk|edits) said:

13 January 2009
Apologies for brining up an old post; however, I thought it might be helful to keep this discussion all in one place. I have a client (married filing jointly) who recently purchased their first home, and I'd like to know if they will qualify for the tax credit. Pretty straightforward except for the fact that only one of the married individuals and each of the couple's parents are also on the title of the property due to the couple's insufficient credit history. The couple's parents are NOT first time homebuyers (i.e., they have ownership in a principle residence in the US for the three-year period before the 'qualifying' purchase.)

Does the fact that each of the couple's parents are on title exclude them from taking advantage of the credit? Or, will the credit be prorated...If so, has there been any guidance issued for how to allocate the credit in these unique circumstances?

Dianeoffutt (talk|edits) said:

February 5, 2009
I also have a situation that the "rules" do not seem to clarify. I have a married couple that just bought a home. It is her FIRST home, his second. So, can I take 1/2 of the credit for the spouse that is a FIRST time home buyer? Seems since IRS does allow to allocate the credit among individuals who own the home, as long as the total credit is not more than $7500, I would think just because one individual owned a prior home it should not affect the other "new first time buyers".

Any suggestions, other than taking the credit with a written explanation as to why only taking 1/2 of it.

Diane Offutt, EA Woodstock, GA 30189

Trillium (talk|edits) said:

5 February 2009
You might take a look at Notice 2009-12, Homebuyer Credit Allocation between Unmarried People] - obviously the "unmarried people" part doesn't apply, but in other discussions we've noted that some of the examples seem to indicate that the involvement of a non-eligible person doesn't stop the eligible person from taking the entire credit. Editing this post to say that this will not be the case for a married couple - as explained in the posts that follow.

AEM CPA (talk|edits) said:

5 February 2009
http://www.google.com/hostednews/ap/article/ALeqM5gdDrWnoMueqVFI-Uo1ClxVZur22AD9652S581

Now they want to make the credit $15,000 with no payback? How long until 40 acres and a mule?

Dianeoffutt (talk|edits) said:

February 5, 2009
Well, now if this $15K with no payback fly's and I find it DIFFICULT to believe, but then again who knows. If it does pass, then what about all the people that take the $7500, does that automatically mean THEY do not have to payback. WHAT a nightmare.

Diane Offutt, EA Woodstock, GA 30189

Death&Taxes (talk|edits) said:

5 February 2009
Hey, AEM, either you found my post in 'Chat' a couple of weeks ago or read it being cited in Jim Maule's blog!

I am doing my first of these: a 192K house in Union County NJ, and from the photo on Live Search, a single house at that....probably a foreclosure. Anyway, my friend who bought it wondered if I did RALs because she needs the money, [refund over 9K]....I don't. If I had the dough I'd lend it to her.

She had to move from a cheap apartment for reasons beyond control. She teaches school with a fairly fixed contract. The settlement is a beaut.....2700+ of Mortgage Insurance, clearly labeled 'one year premium.' Looks like in a year or so, this will join the Toxic Assets scrapheap......guess what large NY bank is the lender?

Riley2 (talk|edits) said:

6 February 2009
Diane, under current law, the wife is not a first-time homebuyer if her husband owned a principal residence in the past three years. Sec. 36(c)(1).

Dianeoffutt (talk|edits) said:

February 6, 2009
Hello Riley2,

I did read SEC 36(c)(1) (see below for a copy of the code section). Since my client's new spouse never owned a home and this IS her first home, my interpretation of the code is only SHE would be allowed 1/2 of the credit (same as if they were living together and were each allowed a part, as long as not more than $7500).

One must wonder, if what you say is true (and it could very well be), then before getting married the parties need to ask each other if they have ever owned a home before. ESPECIALLY since the credit may be as high as $15K and not to be paid back. I interpret this code section as if both spouses are eligible then the $7500. If ONE spouse is eligible then 1/2 NOT the total. I would think some may actually say...well, one spouse is eligible so the WHOLE $7500 to that spouse, and we disregard the fact the other spouse is not eligible. No, I am not interpreting it that way at all. I just believe each person should be standing alone...and not become ineligible due to someone else. I am treating the spouses same as two individuals with an ownership interest in a home...both put down money, both own 50%, so why is the credit, at least half not allowed to the first time homeowner in that married relationship?

This area, first time home buyer is so hazy...Here is another example: let us say there are two owners, NOT married...ONE had a prior home and the other one, it is his first time home..since they are both on the new home, then I interpret only 1/2 of the credit would be allowed to the one who is indeed the first home buyer (unless one can prove a bigger ownership portion then maybe more than 1/2 but not more than $7500). I would think just because one of the owners cannot take the credit it should have no bearing on the owner who is a first time home buyer. So going with that thought I cannot imagine they would discriminate against one spouse. If all else fails I could file MJS and have the wife take the credit and the husband not take it.

Like the lovely rebate checks of last year, it seems everytime a benefit goes to the public it is agony for the taxpayers and preparers. I wish the Government would just make life easy and give a tax credit across the board,and disregard sexual orientation, marriage status, age, etc. Just give the credit to everyone equally and eliminate the ambiguity.

Does anyone have any thoughts on this subject?


SEC 36(c)(1)First-time homebuyer. PER RIA CHECKPOINT 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.

MAYBE they should have added "if one of the individual's is not a first time homebuyer, then only 1/2 credit is allowed". Maybe we will see a revision to the code..once enough accountants go crazy.

Dianeoffutt (talk|edits) said:

February 6, 2009
Hey everyone...in my above LONG response I wrote "if all else fails I could file MJS"..... I meant to say MFS (Married filing separate)...There is no such filing as MJS...then again...maybe one day we will see MJS (Married Joint Separate)...for those people who keep breaking up during the year?????

Rgtaxservice (talk|edits) said:

6 February 2009
Has congress eliminated the backpay requirement on the Homebuyers credit yet?

Ddoshan (talk|edits) said:

6 February 2009
The credit limit is 7500 dollars no matter what. Unmarried couples may split basically any way they see fit. Assuming both qualify. At least that is my understanding.

Jmcdon00 (talk|edits) said:

6 February 2009
Got a fax from a realitor saying the new stimulas plan is going to expand the credit to 10% or $15,000, and if you live there for 3 years it does not need to be paid back. And it is not just for new home buyers anymore. Should be more revenue for us, as many tax returns would need to be amended.

[1]

Kevinh5 (talk|edits) said:

6 February 2009
very few of my clients are in a position to buy a new (to them) home. Most are struggling to keep the ones they have, and would find it difficult to sell the present one.

So I wonder where this 'pent up demand' of potential home buyers is going to come from? Those at the lowest end of the economic scale whose jobs are at stake? Those with sub-prime credit? Those who have already been foreclosed on because they didn't keep their past promises to pay?

Riley2 (talk|edits) said:

6 February 2009
Diane, in your example, in the case of 2 unmarried individuals buying a home, if one of the individuals is not a first-time homebuyer, the entire $7,500 credit can be allocated to the qualifying individual. See Notice 2009-12, example 3

My answer would change if the couple in the preceding paragraph married on or before the date of purchase of the new home, in which case neither spouse may claim the credit.

Jmcdon00 (talk|edits) said:

6 February 2009
I plan on buying my first house in the next 6 months. Yea me.

Futenma (talk|edits) said:

6 February 2009
According to RIA today, the House bill will remove the repayment requirement for the first-time homebuyer credit under Sec. 36 unless the home is resold within 36 months. This would apply to homes bought after Dec. 31, 2008 and before July 1, 2009. On the other hand, the Senate bill would provide a one time 10% tax credit (up to $15,000) on the purchase of a principal residence. Under the Senate bill, the homebuyer could elect to take half the credit in the year of purchase and half in the following year. Who knows what will happen in committee when they go to resolve the differences between the two bills.

Riley2 (talk|edits) said:

6 February 2009
The Senate version of the Stimulus bill raises the credit to $15,000 for homes purchased within one-year of enactment of the bill.

The House version retains the $7,500 limit, but eliminates the recapture tax on homes purchased in the first 6 months of 2009 if the buyer remains in the home for 36 months.

The Senate bill also reinstates the interest deduction for car loans.

Dianeoffutt (talk|edits) said:

February 6, 2009
Riley2,

Thank you for advising me on that Notice 2009-12. I do not have any clients who co-own (and are unmarried)but if it comes up, it is good to know that one of them who is not eligible, automatically allows the other one to take the complete $7500. It definitely is discriminating to allow the unmarrieds to stand alone when it comes to the home investment, yet, if married, then one spouse ineligibility affects the eligible spouse.

Another inequity....people who purchase the home in 2008, take that $7500, must pay back...but same house bought Jan 2009, can get either $7500 or $15000 and NOT pay back. Boy...talk about taxpayers getting mad. Of course, as Kevinh5 above stated "WHO will be buying homes?". I see most of my clients hanging on for dear life just trying to keep what they have.

Thanks for the feedback Riley2.

Dianeoffutt (talk|edits) said:

February 6, 2009
Riley2,

Thank you for advising me on that Notice 2009-12. I do not have any clients who co-own (and are unmarried)but if it comes up, it is good to know that one of them who is not eligible, automatically allows the other one to take the complete $7500. It definitely is discriminating to allow the unmarrieds to stand alone when it comes to the home investment, yet, if married, then one spouse ineligibility affects the eligible spouse.

Another inequity....people who purchase the home in 2008, take that $7500, must pay back...but same house bought Jan 2009, can get either $7500 or $15000 and NOT pay back. Boy...talk about taxpayers getting mad. Of course, as Kevinh5 above stated "WHO will be buying homes?". I see most of my clients hanging on for dear life just trying to keep what they have.

Thanks for the feedback Riley2.

Ubet123 (talk|edits) said:

6 February 2009
Hey every one I have a question that I have not seen or been able to find. I have a client who bought a home individually in Sept/08. He then got married in Nov/08. His new wife owned a home previously. What are his options in claiming the entire $7500 credit? Can he file married filing jointly and recieve the entire credit being how she is not on the mortgage?

Riley2 (talk|edits) said:

6 February 2009
Sounds like he was a first-time homebuyer on the date of purchase, and would be entitled to the entire $7,500 credit.

1150opal (talk|edits) said:

8 February 2009
I have a client who was married until 4/08. Prior to her divorce, she and her husband lived in a home but she was not on the loan or the title during the past 3 years, due to a re-fi at some point in the past. She will be buying a home before 7/1/09. Will she qualify as a first-timer for the credit?

Pcc-cpa (talk|edits) said:

8 February 2009
1150opal - not sure on this, but do know that Sec 36 defines "principle residence" by reference to IRC Sec 121 concerning exclusion of gain on sale or principal residence.... and note the following: Sec 121(d)Special rules--(1) Joint returns--If a husband and wife make a joint return for the taxable year of the sale or exchange of the property, subsections (a) and (c) shall apply if either spouse meets the ownership and use requirements of subsection (a) with respect to such property. See also Reg 1.121-1 (providing guidance on what qualifies as a principal residence) available on this site at Reg._1.121-1.

So I'd start with a presumption that the prior home was her "principal residence" regardless of her not being on the loan or title; from there I'd begin looking for an exception provided in a reg or notice...there has to be something on this.

Pcc-cpa (talk|edits) said:

8 February 2009
Ubet123 - Sec 36 defines as follows: 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.


The code article is not clear; unless there is a reg or notice on this of which I am not aware, I would not simply assume that your client will qualify for the entire amount of credit. Did Congress use the term "Spouse" as that relationship exists at the close of the taxable year or at the time of purchase? By filing jointly, you get joint treatment for the entire year, so you should fail the test, absent IRS guidance to the contrary. My point - everything sounds pretty ambiguous. I would look for a reg or notice and if none, extend and wait for guidance - I certainly would not rely on an online post. All these questions are just now rising to the surface ---- answers will arrive soon, the Service has no choice.

1150opal (talk|edits) said:

8 February 2009
Thanks for your response Pcc-cpa.

The last joint return my client filed with her ex was for 2007, but there was mortgage interest deducted on it.

I agree it is very ambiguous, and will wait for further guidance.

Riley2 (talk|edits) said:

8 February 2009
1150opal, an individual who had a present ownership interest in a home in 2008 would not qualify for the credit, meaning that a remainder interest or other type of future interest will not be a disqualifying interest.

If the home was marital property or community property, then I see no hope for the credit, regardless of how title was held.

Taxestaxes (talk|edits) said:

10 February 2009
OK, I have a couple that closed on their house April 7. They didnt actually get to move in till May 1? Guess that doesnt qualify? How unfair.

Taxestaxes (talk|edits) said:

11 February 2009
Anythoughts on couple moving in new home May 1, but closing April 7? JUst wondering if there is something I could be missing to help these people get this credit?

AEM CPA (talk|edits) said:

11 February 2009
According to CNN.com, it sounds like the $15,000 credit is off the table in committee. They're trying to get it under $800 billion. What a world, what a world....

AEM CPA (talk|edits) said:

11 February 2009
Closing April 7 is no good.

SoCalEA (talk|edits) said:

11 February 2009
I've read that the credit will no longer be refundable if increased to $15,000. Darn - I am buying my first home and I was going to use the cash to payoff the last of my debt.

Taxalmancer (talk|edits) said:

11 February 2009
AP is reporting the $15,000 is history.

AEM CPA (talk|edits) said:

11 February 2009
CNN was on that hours ago.  :o)

SoCalEA (talk|edits) said:

12 February 2009
Increased to $8,000 and still refundable. Payback provision removed if in the home for 3 years. Income limits the same as the original. For all home home purchases in 2009. I believe it is still for "first time home buyers" and not for everyone purchasing a home.

[2]

Taxestaxes (talk|edits) said:

13 February 2009
Just making sure, those claiming the home credit on 2008 tax return still have to pay it back?

Deback (talk|edits) said:

February 14, 2009
The current proposal (included in the stimulus bill) can be found on the following page:

http://finance.senate.gov/press/Bpress/2009press/prb021209.pdf

MEJ (talk|edits) said:

14 February 2009
if you own a rental (never lived in it) and then buy a principal residence, can you qualify for the first time homebuyer's credit?

Taxalmancer (talk|edits) said:

17 February 2009
Trying to clarify the scenario where an unmarried couple buys a house first then gets married.

If an unmarried couple buys a house and the woman is disqualified the man, if qualified, can be allocated the full credit per Notice 2009-12. If that unmarried couple marries later in the same year does that preclude the qualified purchaser the man (assuming they fall under the $150,000 income on their joint return) from claiming the credit on the joint return?

The National Association of Realtors website, Weichert, and a few other national realtors all provide a similar example (#17) and claim that he would NOT be able to claim the credit were they to marry before year's end.

That's not how I thought it would work. Seems like a lot of confusion (especially me) about this credit.

http://www.realtor.org/gapublic.nsf/files/hbtaxcreditqa2008.pdf/$FILE/hbtaxcreditqa2008.pdf

http://www.weichert.com/go/homebuyertaxcreditqa.htm

Marital status on date of purchase applies (Feb 17 and 22 posts)

Riley2 (talk|edits) said:

17 February 2009
Until the regs are issued, we probably cannot be sure.

However, based on statutory language, I believe that the determination of marital status for purposes of defining a first time homebuyer is made at the time of purchase.

If the statute were written any other way, it would cause all sorts of headaches.

For example, I buy a home on January 31, 2009, and on the same date, I efile my 2008 return and receive my $7,500 check from the IRS. On May 1, 2009, I get married to a homeowner. Does this mean I have to return the $7,500 check? I don't think so.

Riley2 (talk|edits) said:

17 February 2009
Incidentally, the 72(t) rules also use this same language, and the Commmittee reports state that the bill requires that the spouse of the individual also meet this requirement as of the date the contract is entered into or construction commences. Thus, if the taxpayer has no spouse on the date that the contract is signed, then the 72(t) rules would apparently allow the taxpayer to be a first time homebuyer under 72(t).

Sjsearl (talk|edits) said:

22 February 2009
Hi Riley. I have a debatable question regarding your last 2 comments. I am a licensed CPA in Dallas, TX. I have a client that claimed the $7,500 FTHB credit, and the home purchased was made in July 2008. He is not a first time home buyer (sold in 2007), but fiance was. They are both on the title, and were married in September 2008. They claimed MFJ in 2008, claiming the FTHB credit.

Any chance he will be okay with claiming this credit? I cannot find the answer to this anyplace.

Riley2 (talk|edits) said:

22 February 2009
Since they were not married at the time of the purchase, I would say that she is eligible for the credit. IRC Sec. 36(a)(1)(C) would apply. See below.

(C) Other individuals. If two or more individuals who are not married purchase a principal residence, the amount of the credit allowed under subsection (a) shall be allocated among such individuals in such manner as the Secretary may prescribe, except that the total amount of the credits allowed to all such individuals shall not exceed $7,500. .

Sjsearl (talk|edits) said:

22 February 2009
Thanks very much Riley. That is exactly what I was thinking. He also told me that on the title shows his name with his wife's maiden name. This should tell the IRS that they were unmarried at time of purchase and could prevent any sort of audit. I will advise him to go ahead and claim the credit and file jointly on his return.

Bell (talk|edits) said:

22 February 2009
Suppose the TP purchased the home when unmarried. Only one name on the title. The spouse that purchased the home did own a former home and was not entitled to the credit. After this purchase, the TP marries. The other spouse that they married did not own a previous home. Can they get the $7,500 credit? I have this scenario.

Riley2 (talk|edits) said:

22 February 2009
No, not a chance.

Bell (talk|edits) said:

22 February 2009
Thank you, Riley2.

Bell (talk|edits) said:

22 February 2009
They do get to use the higher AGI for phase-out purposes. Correct?

94nole (talk|edits) said:

24 February 2009
There is news on the street that people are filing the forms 5405, with particulars "to be determined" and are receiving the rebates BEFORE buying a property. Obviously, they are including numbers that are made up and are committing fraud, but who's to stop 'em, as fast as our trusted legislators are passing legistation?

have any of you heard about this? Of course it is being pushed by the mortgage brokers. what do they care, they'll "earn" their commissions.

Kevinh5 (talk|edits) said:

24 February 2009
That is EXACTLY what I predicted on Jan 16: Discussion:First Time Home Buyer Credit

Taxalmancer (talk|edits) said:

25 February 2009
Ran into a friend of a friend and got briefly talking. He mentioned how he was going to be closing on a house in a few weeks. He asked a few questions abut the tax credit because he said he already filed (two weeks ago) and wanted to make sure he did it correctly. Yikes!

So I have seen, first hand, that people ARE claiming the credit in anticipation of buying.

Jnr2009 (talk|edits) said:

25 February 2009
I have a client who is looking to purchase a home in the next two months. She wants to know if she will qualify for the tax credit and I am still not clear on if she will or not. Here is the situation:

She is legally seperated from her husband and will be divorced this year, but not before the purchase. Her husband bought a house in 2005 and they married in 2006. She has never lived in the house and has been renting in a different state then the house for the last three years. Her name is not on the house title and in the seperation agreement it is stated that the house is 100% his and she has never been finincially involved with it. Is she eligable for the credit?

She is also concerned about the 3 year moving deadline as her job is not location committed. Are there any provisions or do you forsee any provisions for a person who is forced to move for work and not being a "flipper".

AEM CPA (talk|edits) said:

25 February 2009
Since the house her husband owned was not their primary residence, I believe she is eligible for the credit.

AEM CPA (talk|edits) said:

25 February 2009
Pontification alert

People would make their lives and our jobs a lot easier if they would take marriage a little more seriously. Is it really that hard to figure out if you'll be able to spend more than two years with someone? I mean, did you talk to the guy a couple times? Go on any dates? Meet his family? I understand he drives a nice car, but did you speak to his previous three wives? Have some pride in yourself, for heaven's sake.

End Pontification

Kevinh5 (talk|edits) said:

25 February 2009
I Mitre might not agree.

AEM CPA (talk|edits) said:

25 February 2009
Nice.

Trillium (talk|edits) said:

25 February 2009
Maybe "legally separated" means "unmarried" in your state, AEM, but in most states that's not the case.

AEM CPA (talk|edits) said:

25 February 2009
"Will be divorced this year" generally means "will be unmarried" everywhere.

The problem extends far beyond the individual case in question.

Trillium (talk|edits) said:

25 February 2009
If she's married at the time of the home purchase, and her spouse is ineligible, then she is, too. Sec. 36(c)(1).

AEM CPA (talk|edits) said:

25 February 2009
True. To be ineligible, the husband has to have owned a principal residence in the past three years. Was the house the husband bought in 2005 his principal residence? I'm making the assumption (which may or not be true) that they lived together at least while they were together, and the poster stated that she never lived in the house but rented in another state the whole time, so I'm assuming the husband rented in another state as well. If that proves not to be the case, my answer would change.

Or she could just wait until the divorce is final to settle on the house.

Jnr2009 (talk|edits) said:

25 February 2009
TO AEM,

No, the house was not a principle residence. She lived and worked in VA and the house was in MI. He worked on the road as a self employed construction worker from what I understand and split his time off between VA and MI to work on "fixing" up the house in MI. They were both on the three years lease in VA. No one ever really lived in the house in MI except for when he worked on it. (Which she leads me to believe = about 3-4 weeks out of the year until it was rented out last fall.) I tend to stay out of my clients personal lives, but with that situation I can understand why they got divorced. To bad the IRS can't understand that lives don't fit in a box anymore!

To Trillium,

How would the spouse be ineligible if the home was not a primary residence?

Trillium (talk|edits) said:

25 February 2009
Jnr, if you can establish that the MI house was not a principal residence for either of them (see the Feb 8 series of posts above for more on that) then you may be able to establish that they could both, theoretically, be eligible individuals.

But if you're leaning toward that decision, why did you focus so much on that house and who owns it in your original post? It's unimportant who owned/owns it if it wasn't a principal residence. Do you have some doubts about their fact pattern, or maybe you just haven't read up much on the credit? If it's the former, then you need to dig further with them. If it's the latter, take a look at the original legislation and the other info gathered here: First-time homebuyer credit recap.

Mendhasj (talk|edits) said:

26 February 2009
I am getting hammered with questions on this and one of them has me a bit stumped. A guy owns his house and want to sell it to his fiance who has never owned a home. She will then amend her 2008 return to claim the credit. So far I believe this works, the rub comes in that they will be married in December 2009. I know the IRS looks at people as being married for the whole year in which they tie the knot, but she would be carrying it back to 2008 as if she made the purchase 12/31/08 when she was single. My question is whether or not this will still qualify. The fact that they are getting married the same year and he currently owns the house makes me say no. The fact that she is going to treat in as if it were purchased 12/31/08 when single makes me say yes.

Any advice is always appreciated.

AEM CPA (talk|edits) said:

26 February 2009
This must have been exactly what Congress was intending all along....

Perfectly legit, though.

Trillium (talk|edits) said:

26 February 2009
Mendhasj - on the First-time homebuyer credit recap page, take a look a the second bullet point under Specific Common Questions - there are links to several discussions where Riley has already addressed similar situations (including a few places on this discussion, in fact - scroll up to Feb 17: "the determination of marital status for purposes of defining a first time homebuyer is made at the time of purchase" and also see his supporting post made just after that) and also see Feb 22, Riley's answer to Sjsearl). Based on those answers, the fiance would be eligible regardless of the year she chose to report it in.

Ah - on first reading, I did miss the fact that the husband-to-be is selling to the wife-to-be, which should put them afoul of the related party restrictions... but probably doesn't because if "spouse" is determined as of the date of the purchase for eligibility, then it's hard to see how it could be determined as of a different date, i.e., the filing date, for related party status.

Trillium (talk|edits) said:

26 February 2009
Shawn -

Given the importance of this being able to be shown to be an arms-length transaction, are they really likely to end up ahead in this deal? Given typical market conditions, let's say he sells to her at a loss. Then she (and eventually they) has/have a new basis that is lower than it was before, so their eventual gain on subsequent sale would be larger than it would have been, with the risk of exceeding what they could exclude under Sec. 121. Plus, they have various fees and costs for the current transaction that they're not going to be able to avoid, if they want to make this a legal transfer - including, possibly, a refi on the loan. And all of the hassle. Is $8k going to pay for all of that?

Mendhasj (talk|edits) said:

27 February 2009
Thanks for the responses.

I have spoken to my clients regarding all the fees and additional costs out there to see if $8,000 is truly worth the headache. They are weighing everything, I just wanted to know for my own sanity. This is becoming the hottest topic amongst clients and I want to be prepared for any question. Clients tend to get excited if they think they can get money out of the government.

Tpacct (talk|edits) said:

18 March 2009
Couple gets married in June '08.

Purchases a home in October '08

Wife currently owns a home (and owned prior to marriage) which she is trying to sell.

For Husband, it is first home purchase ever.

Conclusion: No first time buyer tax credit - not even half for husband due to the fact that he is married to a non first time home buyer as of date of purchase.

Any one disagree or know of any exceptions?

Sw (talk|edits) said:

2009-03-19
Mother & father want to help their daughter get her first home. Parent are not first time home buyer. Daughter is. If they have deed make out in parents and daughter name would she quailify for FTHB credit.

Trillium (talk|edits) said:

19 March 2009
Notice 2009-12

EZTAX (talk|edits) said:

19 March 2009
Tpacct - agree, no credit.

HTFS (talk|edits) said:

March 31, 2009
OK I asked this question yesterday but apparently I was in the wrong type of question. I have a client who is not married. She is moving in with her boyfriend who owns a home. She has never owned a home. He is getting a new mortgage and is putting her name on it so she will have 50% interest in her first principle residence. Does this qualify for the credit? She is in a sense purchasing her first home by buying half of his. Any thoughts?

Swortinger (talk|edits) said:

3 April 2009
I have another "out of the box" scenario that I hope someone can confirm I am making the right assumption. I have a client that owned a home in Tulsa, OK that his mother lived in as her primary residence for the past 35+ years. She deeded the home to him several years ago and he owned the home and paid the mortgage for her. Mother has been a dependent on the son's tax return for as long as I have been doing their return (5years). Son moved to FL and has lived in FL for the past 5+ years...mother moved to FL just 2 years ago. Just sold the home in Tulsa, OK was a rental property for about 1 year.

Does the son qualify for the $8,000 home buyers credit? Is he assumed to be a "first-time home buyer"? If the home in Tulsa was occupied by his wife...I know that he would not qualify, but when the home is owned by him and occupied by his mother as a principal residence who is his dependent does that disqualify him from the credit?

I am making the assumption that he would qualify for the credit as he has records of paying rent for himself personally in FL. He did not own a "personal residence" and I don't see any regulations on a dependent disqualifying someone as a "first-time home buyer." Any thoughts would be appreciated.

AEM CPA (talk|edits) said:

3 April 2009
The law explicitly applies only to the individual; your client qualifies.

Jenna (talk|edits) said:

7 April 2009
Here is a scenario and would like to get some of your feedback. I have a couple who are getting married this year.

Here are some facts: -They both never owned a home. -The husband-to-be is the sole income provider and is making more than 95K(so he is phased out completely if he were to try to get the credit as a "single" individual). -Married filing jointly won't start phasing out until they make 150K+ -Wife-to-be has no employment and will be kept off the loan since it will mess up their ratio to get a loan. -Couple is getting married prior to close of escrow and will add wife on title after escrow closes.

They will have only the husband on the purchase contract, but will add the wife on title after escrow closes. Will they meet the "married filing jointly" phaseout in order to get the credit?

I hope I made sense?

Ensen (talk|edits) said:

20 April 2009
I would say they qualify. The martial status on the last day of the year is their status for the whole year. So they'll be treated as being married for the full year of 2009. I don't think having on the husband on the loan matters.

Consumer post moved to new discussion in Consumer Forum.

Tb in sf (talk|edits) said:

6 May 2009
This just mirrors earlier conclusions but I don't think this guidance was out when the discussions took place (UBET123, Riley2, Taxalmanacer back in mid-Feb)...the IRS appears to have answered the question about a marriage later in the year to a DQ'd individual:

First-Time Homebuyer Credit: Scenarios

S1. If a single person (Taxpayer A) qualifies as a first-time homebuyer at the time he/she purchases a home with someone (Taxpayer B) that is not a first-time homebuyer and then later that year they marry each other, is the credit still allowed?

A. Eligibility for the first-time homebuyer credit is determined on the date of purchase. If Taxpayer A, a first-time homebuyer, buys a house and then later that year marries Taxpayer B, not a first-time homebuyer, the credit is allowable to Taxpayer A. Taxpayer A may take the maximum credit.


Interesting that this is an exception to that general rule about marital status on 12/31 controlling for the year. Also "take the maximum credit" implies "married filing jointly."

If I find it in a more authoritative format I'll update this post. The web page update is dated April 13, 2009.

Gmacdon167 (talk|edits) said:

22 May 2009
I was asked this question twice in a 1 hour period the other day. Just wanted to be sure that comments to Mendhasj were correct. A fiance sells his home to his future spouse(she was never a homeowner). They marry a month later (all of this in 2009). She now adds him back on the title via quit claim deed. Because the sale happened when they were not "related parties" she qualifies for the credit on their joint return for 2009 (or she can amend to claim in 2008). Correct?? This just does not seem to be the spirit of what was intended. If this is indeed correct, just another example of why we are in debt.

Riley2 (talk|edits) said:

24 May 2009
If W executes a quit-claim deed, the recapture rules would cause her to lose the credit.

AEM CPA (talk|edits) said:

26 May 2009
Somebody asked about this, and I don't know whether it's been addressed, but here you go:

http://money.cnn.com/2009/05/18/real_estate/tax_credit_as_downpayment/index.htm?postversion=2009051912

January 15, 2010 - the first person who got $8,000 free money as a down payment complains, "They said I would get $8,000 back on my tax return if I bought a house. How am I supposed to pay my bills now?"

Guadalupe (talk|edits) said:

24 August 2009
unclear on one of the questions/answers(from jenna). Married couple qualified(never owned property), but titled taken under one spouse(income earned)....is it any consideration about adjusted gross income qualification?.....and second, if down payment was gifted by parent(who is not the seller), credit still applies, right?

Riley2 (talk|edits) said:

24 August 2009
Credit is phase-out between AGI of $150,000 ($75,000 for MFS) and $170,000 ($95,000 for MFS). Credit limited to $4,000 on an MFS return. Not sure that title is really relevant if you are in a community property state.

Guadalupe (talk|edits) said:

24 August 2009
thanks Riley2, basically in a community property state, for a couple filing jointly, it should not be relevant that title is under one spouse only(for purposes of AGI limit, but the filing status.

And in reference to "A homebuyer who acquires their home by gift or inheritance", it is not the same as a homebuyer getting a gift of money to help with down payment(even if the amount could be large enough to pay for the property)

Riley2 (talk|edits) said:

25 August 2009
Property acquired with gifted funds will qualify for the credit. Property acquired by gift or inheritance will not qualify for the credit.

TAXBILLY (talk|edits) said:

25 August 2009
What about the situation where there are three beneficiaries (siblings) inheriting a house from their deceased parent and one buys out the other two? Would the buyout portion be eligible for the credit?

taxbilly

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