Expanded and Extended Home Buyers Credithttp://www.realtoractioncenter.com/realtor-party/documents/2009-NAR-Issue-Brief-Homebuyer-Tax-Credit-Changes-1104-1107.pdf First Time Home Buyer Credit...Questions and Answers: Q. What is the credit? A. The first-time home buyer credit is a new tax credit included in the recently enacted Housing and Economic Recovery Act of 2008. For Homes purchased in 2008, the credit operates like an interest-free loan because it must be repaid over a 15-year period. The credit was expanded in 2009 for homes purchased in 2009, increasing the amount of the credit and eliminating the requirement to repay the credit, unless the home ceases to be your principal residence within the 36-month period beginning with the purchase date. Q. How much is the credit? A. The credit is 10% of the purchase price of the home, with a maximum available credit of $8,000 if you purchased your home in 2009, for either a single taxpayer or a married couple filing a joint return, but only half of that amount for married persons filing separate returns. Q. Which home purchases qualify for the first-time home buyer credit? A. Any home purchased as the taxpayer's principal residence and located in the United States qualifies. You must buy the home. Q. Do Vacation homes, second homes, and rental property qualify for this credit? A. No Q. Who is considered to be a first-time home buyer? A. Taxpayers who have not owned, nor have their spouses owned, another principal residence at any time during the three years prior to the date of purchase. Q. How do I apply for the credit? A. The credit is claimed on new IRS form 5405, First-Time Home Buyer Credit, and filed with your 2008 (amended) or 2009 federal income tax form. A. Are there income limits? A. Yes. the credit is reduced or eliminated for higher-income taxpayers. The credit is phased out based on your modified adjusted gross income (MAGI). For a married couple filing a joint return, the phase-out range is $150,000 to $170,000. For other taxpayers, the phase-out range is $75,000 to $95,000. This means that the full credit is available for married couples filing a joint return whose MAGI is $150,000 or less and for other taxpayers whose MAGI is $75,000 or less. Q. Can a taxpayer claim the first-time home buyer credit after entering into a contract for the purchase of a residence but before closing on the purchase? A. No. Taxpayers cannot claim the credit before there is a completed sale and purchase of the residence. The sale and purchase are generally completed at the time of closing on the purchase. Q. Can a taxpayer claim the first-time home buyer 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. Q. I purchased a home that qualifies for the first-time home buyer credit. I will be renting two of the bedrooms and reporting the rental income on Schedule E. Will I still qualify for the credit if I use the home as my principal residence? A. Yes, if you meet all first-time home buyer eligibility requirements. See Form 5405, First-Time Home Buyer Credit, for more details. Q. IF two unmarried people buy a house together, how do they determine how much each may take of the credit? A. IRS Notice 2009-12 provides guidance for allocating the first-time home buyer credit between tax payers who are not married. Q. I am a single co-owner of a home. How do I get this credit? A. Depending on the year of purchase, you will claim the credit on either your 2008 or 2009 Federal income tax return. Q. I don't owe taxes and/or my income is exempt from tax and I do no have a filing requirement, do I qualify for the credit? A. The credit is fully refundable and, if you qualify as a first-time home buyer, having tax-exempt income will not preclude eligibility. Although there are maximum income limits for qualifying first-time home buyers, there are no minimum income criteria. Thus, someone with no taxable income who qualified as a first-time home buyer may file for the sole purpose of claiming the credit for a refund. Q. Who cannot take the credit? A. If any of the following describe you, you cannot take the credit, even if you buy a new home: *income of $95.000 and above. Your income exceeds the phase-out range. This means joint filers with MAGI of $170,000 and above and other taxpayers with MAGI of $95,000. *You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild. * You do not use the home as your principal residence. *You sell your home before the end of the year. *You are a non-resident alien. Q. does previously inheriting a home and living in the inherited home automatically disqualify an individual as a first time home buyer with respect to a different home that is purchased within the prescribed 2009 and 2009 time frames? A. Yes, an ownership interest in a prior principal residence would preclude the taxpayer from being considered a first time home buyer. As long as the taxpayer owned and used the prior home as his principal residence, then he is not a first time home buyer. There is no exception for taxpayers who did not buy their prior residences. Q. Is a step-relative considered a related party? A. Step-relatives are neither ancestors nor lineal descendent's and are therefore not related persons for purposes of the first time home buyer credit. Q. If I claim the first-time home buyer credit in 2009 and stop using the property as my main home before the 36 month period expires after I purchase, how is the credit repaid and how long would I have to repay it? A. If, within 36 months of the date of purchase, the property is no longer used as the taxpayer's principal residence, the taxpayer is required to repay the credit. Repayment of the full amount of the credit is due at the time the income tax return for the year the home ceased to be the taxpayer's principal residence is due. The full amount of the credit is reflected as additional tax on that year's tax return. Form 5405 and its instructions will be revised for tax year 2009 to include information about repayment of the credit.
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