First-time homebuyers are still pursuing the tax credit – but there are questions -

There are so many different first time homebuyers and so many specific situations that there are a lot of questions out there…

I filed for the first-time homebuyer tax credit of $7500 on my 2008 tax return for a home I purchased early in 2009.  That tax credit has to be repaid.  Is there any way I can get the $8000 tax credit that doesn’t have to be repaid instead?   Yes.  File an amended tax return for 2008 removing the $7500 tax credit and claim the $8000 tax credit on your 2009 return. 

Can I use the $8000 first-time homebuyer tax credit for my down payment?   Basically, No.  There is a provision allowing a lender to do a short term loan of the tax credit for down payment or closing costs, but I have yet to hear of any lender who will do so. 

Do I have to pay back the $8000 tax credit?  No, unless you use it as your primary residence for less than 36 months.  In that case, you will owe the full amount of the tax credit in the year you stop living in the house as your primary residence.

My parents are cosigning the loan for my first house.  They do not qualify for the first-time homebuyer tax credit.  Can I still take it?   Yes.  You will be the homeowner and as long as you meet all the requirements, you get the credit.

I am getting married later this year.  I qualify for the first-time homebuyer tax credit, but my future husband does not.  If I buy a house before we are married, can I take the tax credit?   Yes, as long as it is your primary residence.  Talk to your accountant about how you should file your tax return.  One note:  if a couple is married when they buy a house, the IRS position is that neither of them can have owned a primary residence within the past 3 years if they are to qualify for the first-time homebuyer tax credit.

I am looking at a fixer house that needs a lot of work.  Can I buy it and get the first-time homebuyer tax credit even if I don’t move in until after the renovations are finished?   Only if you actually occupy the home as your primary residence prior to June 30, 2010.

Are there any income limits for claiming the first-time homebuyer tax credit?   Yes.  For a single taxpayer, the modified adjusted gross income limit is $125,000; for married taxpayers, it is $225,000.  Incomes of up to $20,000 more can qualify on a proportionate basis, but phase out completely at $145,000 and $245,000.  Modified adjusted gross income is the adjusted gross income shown on your tax return, plus some types and amounts of foreign-earned income.  Check with the IRS for details.

What is the difference between a tax credit and a tax deduction?   A tax credit reduces the amount of tax you owe by the full amount of the credit.  A tax deduction reduces the amount of income on which you pay tax. 

What if I don’t owe $8000 in taxes?  You will receive a check back from the IRS for the difference between the amount of the credit and the amount you owe.

There are two excellent websites with additional information and examples of both the first-time homebuyer tax credit and the repeat buyer tax credit at the National Association of Homebuilders and the IRS website.  While these sites address some specifics, you will want to talk with your personal tax advisor, who knows your financial situation and can give you the best advice. 

Please share any experiences, information you have gleaned or additional questions – we can all help each other.

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