Posts Tagged ‘first time home buyer’

2011 December Home Sales Report – Wisconsin REALTORS® Association.

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The First-Time Homebuyer Tax Credit is the subject of numerous questions and confusion. It is always best to consult an accountant or tax adviser about any tax related questions. This post is intended to offer some background and resources from the IRS. Indeed, everything in this post comes directly from the IRS website. You should consult an accountant or tax advisor about this credit and your specific circumstances.

The Original Tax Credit

The Housing and Economic Recovery Act of 2008 established a tax credit for first-time homebuyers that could be worth up to $7,500. For homes purchased in 2008, the credit was similar to a no-interest loan that must be repaid in 15 equal, annual installments beginning with the 2010 income tax year. The old deadline for receiving the credit was the end of November, 2009. The new law extended the deadlines for buyers that “enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010.”  For more information and common questions and answers, click here.

Homebuyer Credit Expanded & Extended

The Worker, Homeownership and Business Assistance Act of 2009 extended and expanded the first-time homebuyer credit. The new law made the following changes (among others):

  • Extended the deadlines for buyers that “enter into a binding contract to buy a principal residence on or before April 30, 2010 and close on the home by June 30, 2010.
  • Increased the credit to $8,000
  • Expanded the credit to “long time” homeowners who meet certain requirements
  • Raised the income limitations for homeowners claiming the credit.


    New Deadlines

    The new law has a two-tiered deadline: (1) The offer to purchase contract must be signed before the end of April and (2) the closing must occur before the end of June.

    Deadlines:        Enter into binding purchase contract on or before April 30, 2010

                              Close on the sale on or before June 30, 2010

    Taxpayers may have the option of claiming the credit on either their 2009 or 2010 returns. The credit may not be claimed before the closing date.  Any question regarding when the tax credit can be claimed should be directed to an accountant or tax advisor. 

    Increased Credit Amount

    The new law increases the credit to $8,000. If the home is purchased in 2009 or later, the credit does not need to be paid back unless the home ceases to be the main residence within a 3-year period after the purchase. In addition, “long-time residents” are now eligible for a $6,500 credit.

    Expansion To “Long-time Residents”

    The tax-credit applies to first-time homebuyers and “long-time” homebuyers. Neither category requires the home to be your very first home. In fact, “first-time homebuyer” means a buyer “who has not owned a primary residence during the three years up to the date of purchase.” A “long-time resident” is a buyer who has owned and used the same house as a principal or primary residence for at least five consecutive years of the 8-year period ending on the date of purchase of the new home as a primary residence.

Common Questions and Answers:

Q: Taxpayer A is a single first-time home buyer. Taxpayer B (parent) cosigns for A and does not qualify. Both names are on the mortgage. Can Taxpayer A claim the credit and, if so, how much? 

A. Yes. Taxpayer B is not a first-time homebuyer and cannot claim any portion of the credit, but A may claim the entire credit ($7,500 for purchase in 2008; $8,000 for purchase in 2009), if the home was purchased as Taxpayer A’s primary residence. (Source: IRS.gov webpage)

 Q: Taxpayer signs an offer to purchase before the April 30, 2010 deadline, but the purchase is a short sale that is contingent upon lender approval. Can the taxpayer qualify for the credit if the closing occurs before the June 30, 2010 deadline?

A: Probably. The fact that the offer is contingent upon lender approval should not disqualify the taxpayer from receiving the credit. The short sale lender is not required to have a binding agreement. Rather, the lender’s approval is just another contingency, just like the inspection contingency, the financing contingency or a testing contingency. 

Q: Can a married couple qualify for the first-time homebuyer tax credit if only one is meets the requirements?

A: No. Married couples cannot qualify unless both spouses meet the 3-year requirement. (Source: Turbo Tax Web Site; IRS.Gov site)

 Q: This tax law has already been extended once. Will it be extended again?

A: Your guess is as good as ours.

As with all laws and regulations, there are many exceptions, rules, loop-holes, and caveats. Consult an accountant or tax adviser and do not rely upon any website for advice – not even this one. A good place to start is the IRS Website.

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