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Frequently Asked Questions
About the First-Time Home Buyer Tax Credit
The
Worker, Homeownership, and Business Assistance Act of 2009 has extended
the tax credit of up to $8,000 for qualified first-time home buyers
purchasing a principal residence. The tax credit now applies to sales
occurring on or after January 1, 2009 and on or before April 30, 2010.
However, in cases where a binding sales contract is signed by April 30,
2010, a home purchase completed by June 30, 2010 will qualify.
For sales occurring after November 6, 2009, the Act establishes income
limits of $125,000 for single taxpayers and $225,000 for married
couples filing joint returns.
The income limits for sales occurring on or after January 1, 2009 and
on or before November 6, 2009, are $75,000 for single taxpayers and
$150,000 for married taxpayers filing joint returns.
The following questions and answers provide basic information about the
tax credit. If you have more specific questions, we strongly encourage
you to consult a qualified tax advisor or legal professional about your
unique situation.
- Who is eligible to claim the $8,000 tax credit?
First-time home buyers purchasing any kind of home—new or resale—are
eligible for the tax credit. To qualify for the tax credit, a home
purchase must occur on or after January 1, 2009 and on or before April
30, 2010. For the purposes of the tax credit, the purchase date is the
date when closing occurs and the title to the property transfers to the
home owner. A limited exception exists for certain contract for deed
purchases and installment sale purchases. See the IRS website for more detail.
However, the law also allows home sales occurring by June 30, 2010 to
qualify, provided they are due to a binding sales contract in force on
or before April 30, 2010.
Persons who are claimed as dependents by other taxpayers or who are
under age 18 are not qualified for the tax credit program.
- What is the definition of a first-time home buyer?
The law defines “first-time home buyer” as a buyer who has not owned a
principal residence during the three-year period prior to the purchase.
For married taxpayers, the law tests the homeownership history of both
the home buyer and his/her spouse.
For example, if you have not owned a home in the past three years but
your spouse has owned a principal residence, neither you nor your
spouse qualifies for the first-time home buyer tax credit. However, IRS
Notice 2009-12 allows unmarried joint purchasers to allocate the credit
amount to any buyer who qualifies as a first-time buyer, such as may
occur if a parent jointly purchases a home with a son or daughter.
Ownership of a vacation home or rental property not used as a principal
residence does not disqualify a buyer as a first-time home buyer.
- How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
- Are there any income limits for claiming the tax credit?
Yes. For sales occuring after November 6, 2009, the income limit for
single taxpayers is $125,000; the limit is $225,000 for married
taxpayers filing a joint return. The tax credit amount is reduced for
buyers with a modified adjusted gross income (MAGI) of more than
$125,000 for single taxpayers and $225,000 for married taxpayers filing
a joint return. The phaseout range for the tax credit program is equal
to $20,000. That is, the tax credit amount is reduced to zero for
taxpayers with MAGI of more than $145,000 (single) or $245,000
(married) and is reduced proportionally for taxpayers with MAGIs
between these amounts.
- The income limits for claiming the tax credit were raised when the tax credit was extended. Are the higher limits retroactive?
No. The new income limits are only applicable to purchases occurring after November 6, 2009.
The income limits for sales occuring on or after January 1, 2009 and on
or before November 6, 2009 are $75,000 for single taxpayers and
$150,000 for married couples filing jointly.
- What is “modified adjusted gross income”?
Modified adjusted gross income or MAGI is defined by the IRS. To find
it, a taxpayer must first determine “adjusted gross income” or AGI. AGI
is total income for a year minus certain deductions (known as
“adjustments” or “above-the-line deductions”), but before itemized
deductions from Schedule A or personal exemptions are subtracted. On
Forms 1040 and 1040A, AGI is the last number on page 1 and first number
on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of
2007). Note that AGI includes all forms of income including wages,
salaries, interest income, dividends and capital gains.
To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.
- If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than
$8,000 are available for some taxpayers whose MAGI exceeds the phaseout
limits.
- Can you give me an example of how the partial tax credit is determined?
Just as an example, assume that a married couple has a modified
adjusted gross income of $235,000. The applicable phaseout to qualify
for the tax credit is $225,000, and the couple is $10,000 over this
amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5.
When you subtract 0.5 from 1.0, the result is 0.5. To determine the
amount of the partial first-time home buyer tax credit that is
available to this couple, multiply $8,000 by 0.5. The result is $4,000.
Here’s another example: assume that an individual home buyer has a
modified adjusted gross income of $138,000. The buyer’s income exceeds
$125,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000
yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35.
Multiplying $8,000 by 0.35 shows that the buyer is eligible for a
partial tax credit of $2,800.
Please remember that these examples are intended to provide a general
idea of how the tax credit might be applied in different circumstances.
You should always consult your tax advisor for information relating to
your specific circumstances.
- How is this home buyer tax credit different from the tax credit that Congress enacted in early 2009?
The tax credit’s income limits were increased, the documentation
requirements were tightened, and the program's deadlines were extended.
- How do I claim the tax credit? Do I need to complete a form or application? Are there documentation requirements?
You claim the tax credit on your federal income tax return.
Specifically, home buyers should complete IRS Form 5405 to determine
their tax credit amount, and then claim this amount on line 67 of the
1040 income tax form for 2009 returns (line 69 of the 1040 income tax
form for 2008 returns). No other applications are required, and no
pre-approval is necessary. However, you will want to be sure that you
qualify for the credit under the income limits and first-time home
buyer tests. Note that you cannot claim the credit on Form 5405 for an
intended purchase for some future date; it must be a completed
purchase. Home buyers must attach a copy of their HUD-1 settlement form
(closing statement) to Form 5405 as proof of the completed home
purchase.
- What types of homes will qualify for the tax credit?
Any home that will be used as a principal residence will qualify for
the credit, provided the home is purchased for a price less than or
equal to $800,000. This includes single-family detached homes, attached
homes like townhouses and condominiums, manufactured homes (also known
as mobile homes) and houseboats. The definition of principal residence
is identical to the one used to determine whether you may qualify for
the $250,000 / $500,000 capital gain tax exclusion for principal
residences.
It is important to note that you cannot purchase a home from, among
other family members, your ancestors (parents, grandparents, etc.),
your lineal descendants (children, grandchildren, etc.) or your spouse
or your spouse’s family members. Please consult with your tax advisor
for more information. Also see IRS Form 5405.
- I read that the tax credit is “refundable.” What does that mean?
The fact that the credit is refundable means that the home buyer credit
can be claimed even if the taxpayer has little or no federal income tax
liability to offset. Typically this involves the government sending the
taxpayer a check for a portion or even all of the amount of the
refundable tax credit.
For example, if a qualified home buyer expected, notwithstanding the
tax credit, federal income tax liability of $5,000 and had tax
withholding of $4,000 for the year, then without the tax credit the
taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the
taxpayer qualified for the $8,000 home buyer tax credit. As a result,
the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000
owed).
- Instead
of buying a new home from a home builder, I hired a contractor to
construct a home on a lot that I already own. Do I still qualify for
the tax credit?
Yes. For the purposes of the home buyer
tax credit, a principal residence that is constructed by the home owner
is treated by the tax code as having been “purchased” on the date the
owner first occupies the house. In this situation, the date of first
occupancy must be on or after January 1, 2009 and on or before April
30, 2010 (or by June 30, 2010, provided a binding sales contract was in
force by April, 30, 2010).
In contrast, for newly-constructed homes bought from a home builder,
eligibility for the tax credit is determined by the settlement date.
- Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
Yes. The tax credit can be combined with an MRB home buyer program.
Note that first-time home buyers who purchased a home in 2008 may not
claim the tax credit if they are participating in an MRB program.
- I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
No. You can claim only one.
- I am not a U.S. citizen. Can I claim the tax credit?
Maybe. Anyone who is not a nonresident alien (as defined by the IRS),
who has not owned a principal residence in the previous three years and
who meets the income limits test may claim the tax credit for a
qualified home purchase. The IRS provides a definition of “nonresident
alien” in IRS Publication 519.
- Is a tax credit the same as a tax deduction?
No. A tax credit is a dollar-for-dollar reduction in what the taxpayer
owes. That means that a taxpayer who owes $8,000 in income taxes and
who receives an $8,000 tax credit would owe nothing to the IRS.
A tax deduction is subtracted from the amount of income that is taxed.
Using the same example, assume the taxpayer is in the 15 percent tax
bracket and owes $8,000 in income taxes. If the taxpayer receives an
$8,000 deduction, the taxpayer’s tax liability would be reduced by
$1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.
- I bought a home in 2008. Do I qualify for this credit?
No, but if you purchased your first home between April 9, 2008 and
January 1, 2009, you may qualify for a different tax credit. Please
consult with your tax advisor for more information.
- Is
there a way for a home buyer to access the money allocable to the
credit sooner than waiting to file their 2009 or 2010 tax return?
Yes. Prospective home buyers who believe they qualify for the tax
credit are permitted to reduce their income tax withholding. Reducing
tax withholding (up to the amount of the credit) will enable the buyer
to accumulate cash by raising his/her take home pay. This money can
then be applied to the downpayment.
Buyers should adjust their withholding amount on their W-4 via their
employer or through their quarterly estimated tax payment. IRS
Publication 919 contains rules and guidelines for income tax
withholding. Prospective home buyers should note that if income tax
withholding is reduced and the tax credit qualified purchase does not
occur, then the individual would be liable for repayment to the IRS of
income tax and possible interest charges and penalties.
In addition, rule changes made as part of the economic stimulus
legislation allow home buyers to claim the tax credit and participate
in a program financed by tax-exempt bonds. As a result, some state
housing finance agencies have introduced programs that provide
short-term second mortgage loans that may be used to fund a
downpayment. Prospective home buyers should check with their state
housing finance agency to see if such a program is available in their
community. To date, 18 state agencies have announced tax credit
assistance programs, and more are expected to follow suit. The National
Council of State Housing Agencies (NCSHA) has compiled a list of such
programs, which can be found here.
- HUD is now allowing "monetization" of the tax credit. What does that mean?
It means that HUD allows buyers using FHA-insured mortgages to apply
their anticipated tax credit toward their home purchase immediately
rather than waiting until they file their 2009 or 2010 income taxes to
receive a refund. These funds may be used for certain downpayment and
closing cost expenses.
Under HUD’s guidelines, non-profits and FHA-approved lenders are
allowed to give home buyers short-term loans of up to $8,000. The
guidelines also allow government agencies, such as state housing
finance agencies, to facilitate home sales by providing longer term
loans secured by second mortgages.
Housing finance agencies and other government entities may also issue
tax credit loans, which home buyers may use to satisfy the FHA 3.5
percent downpayment requirement. In addition, approved FHA lenders can
purchase a home buyer’s anticipated tax credit to pay closing costs and
downpayment costs above the 3.5 percent downpayment that is required
for FHA-insured homes.
More information about the guidelines is available on the NAHB web site. Read the HUD mortgagee letter (pdf) and an explanation of the FHA Mortgagee Letter on Tax Credit Monetization (pdf). An FAQ about monetization (pdf) is available at the NAHB web site.
- If
I’m qualified for the tax credit and buy a home in 2009 (or 2010), can
I apply the tax credit against my 2008 (or 2009) tax return?
Yes. The law allows taxpayers to choose (“elect”) to treat qualified
home purchases in 2009 (or 2010) as if the purchase occurred on
December 31, 2008 (or if in 2010, December 31, 2009). This means that
the previous year’s income limit (MAGI) applies and the election
accelerates when the credit can be claimed. A benefit of this election
is that a home buyer in 2009 or 2010 will know their prior year MAGI
with certainty, thereby helping the buyer know whether the income limit
will reduce their credit amount.
Taxpayers buying a home who wish to claim it on their prior year tax
return, but who have already submitted their tax return to the IRS, may
file an amended return claiming the tax credit using Form 1040X. You
should consult with a tax professional to determine how to arrange this.
- For
a home purchase in 2009 or 2010, can I choose whether to treat the
purchase as occurring in the prior or present year, depending on in
which year my credit amount is the largest?
Yes. If the
applicable income phaseout would reduce your home buyer tax credit
amount in the present year and a larger credit would be available using
the prior year MAGI amounts, then you can choose the year that yields
the largest credit amount.
- How
can two unmarried buyers allocate the tax credit if one qualifies for
the $8,000 first-time home buyer tax credit and the other qualifies for
the $6,500 repeat home buyer credit?
- The buyers can
allocate the tax credit in any reasonable manner, provided neither
claims a tax credit higher than the one they qualify for and the home purchase does not yield a total of more than $8,000 in tax
credits. For example, the repeat home buyer could claim $6,500 and the
first-time home buyer could claim $1,500. Alternatively, both buyers
could claim a $4,000 tax credit.
- Does
a married couple qualify for any home buyer tax credit in the following
situation? Spouse A has lived in and owned the same principal residence
for at least five years. Spouse B has lived in and owned the same
principal residence for less than five years.
In this
situation, the couple does not qualify for any home buyer tax credit.
Because the couple is married, the law tests the ownership history of both spouses. Spouse A clearly does not qualify for the $8,000 first-time home buyer tax credit, so neither does Spouse B.
Spouse A does appear to qualify for the $6,500 repeat buyer credit, but
because Spouse B has not owned and lived in the same principal
residence for at least five years, neither of them can claim the repeat
home buyer tax credit.
Frequently Asked Questions
About the Move-Up/Repeat Home Buyer Tax Credit
The
Worker, Homeownership, and Business Assistance Act of 2009 has
established a tax credit of up to $6,500 for qualified move-up/repeat
home buyers (existing home owners) purchasing a principal residence
after November 6, 2009 and on or before April 30, 2010 (or purchased by
June 30, 2010 with a binding sales contract signed by April 30, 2010).
The following questions and answers provide basic information about the tax credit. If you have more specific questions,
we strongly encourage you to consult a qualified tax advisor or legal
professional about your unique situation.
- Who is eligible to claim the $6,500 tax credit?
Qualified move-up or repeat home buyers purchasing any kind of home are eligible to claim this credit.
- What is the definition of a move-up or repeat home buyer?
The law defines a tax credit qualified move-up home buyer (“long-time
resident”) as a person who has owned and resided in the same home for
at least five consecutive years of the eight years prior to the
purchase date. For married taxpayers, the law tests the homeownership
history of both the home buyer and his/her spouse. That is, both
spouses must qualify as long-time residents, with at least five years
of principal residency for each. Repeat home buyers do not have to
purchase a home that is more expensive than their previous home to
qualify for the tax credit.
- How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up
to a maximum of $6,500. Purchases of homes priced above $800,000 are
not eligible for the tax credit.
- Are there any income limits for claiming the tax credit?
Yes. The income limit for single taxpayers is $125,000; the limit is
$225,000 for married taxpayers filing a joint return. The tax credit
amount is reduced for buyers with a modified adjusted gross income
(MAGI) above those limits. The phaseout range for the tax credit
program is equal to $20,000. That is, the tax credit amount is reduced
to zero for taxpayers with MAGI of more than $145,000 (single) or
$245,000 (married) and is reduced proportionally for taxpayers with
MAGIs between these amounts.
- What is “modified adjusted gross income”?
Modified adjusted gross income or MAGI is defined by the IRS. To find
it, a taxpayer must first determine "adjusted gross income" or AGI. AGI
is total income for a year minus certain deductions (known as
"adjustments" or "above-the-line deductions"), but before itemized
deductions from Schedule A or personal exemptions are subtracted. On
Forms 1040 and 1040A, AGI is the last number on page 1 and the first
number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4
(as of 2007). Note that AGI includes all forms of income including
wages, salaries, interest income, dividends and capital gains.
To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.
- If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than
$6,500 are available for some taxpayers whose MAGI exceeds the phaseout
limits.
- Can you give me an example of how the partial tax credit is determined?
Just as an example, assume that a married couple has a modified
adjusted gross income of $235,000. The applicable phaseout to qualify
for the tax credit is $225,000, and the couple is $10,000 over this
amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5.
When you subtract 0.5 from 1.0, the result is 0.5. To determine the
amount of the partial first-time home buyer tax credit that is
available to this couple, multiply $6,500 by 0.5. The result is $3,250.
Here’s another example: assume that an individual home buyer has a
modified adjusted gross income of $138,000. The buyer’s income exceeds
$125,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000
yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35.
Multiplying $6,500 by 0.35 shows that the buyer is eligible for a
partial tax credit of $2,275.
Please remember that these examples are intended to provide a general
idea of how the tax credit might be applied in different circumstances.
You should always consult your tax advisor for information relating to
your specific circumstances.
- How
is this home buyer tax credit different from the tax credit that
Congress enacted in July of 2008? How is this different than the rules
established in early 2009?
The previous tax credits applied only to first-time home buyers and were for different amounts of money.
- How do I claim the tax credit? Do I need to complete a form or application? Are there documentation requirements?
You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on
line 67 of the 1040 income tax form for 2009 returns (line 69 of the
1040 income tax form for 2008 returns).
No other applications are required, and no pre-approval is necessary.
However, you will want to be sure that you qualify for the credit under
the income limits and repeat home buyer tests. Note that you cannot
claim the credit on Form 5405 for an intended purchase for some future
date; it must be a completed purchase. Home buyers must attach a copy
of their HUD-1 settlement form (closing statement) to Form 5405 as
proof of the completed home purchase.
- What types of homes will qualify for the tax credit?
Any home that will be used as a principal residence will qualify for
the credit, provided the home is purchased for a price less than or
equal to $800,000. This includes single-family detached homes, attached
homes like townhouses and condominiums, manufactured homes (also known
as mobile homes) and houseboats. The definition of principal residence
is identical to the one used to determine whether you may qualify for
the $250,000 / $500,000 capital gain tax exclusion for principal
residences.
It is important to note that you cannot purchase a home from, among
other family members, your ancestors (parents, grandparents, etc.),
your lineal descendants (children, grandchildren, etc.) or your spouse
or your spouse’s family members. Please consult with your tax advisor
for more information. Also see IRS Form 5405.
- I read that the tax credit is “refundable.” What does that mean?
The fact that the credit is refundable means that the home buyer credit
can be claimed even if the taxpayer has little or no federal income tax
liability to offset. Typically this involves the government sending the
taxpayer a check for a portion or even all of the amount of the
refundable tax credit.
For example, if a qualified home buyer expected, notwithstanding the
tax credit, federal income tax liability of $5,000 and had tax
withholding of $4,000 for the year, then without the tax credit the
taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the
taxpayer qualified for the $6,500 home buyer tax credit. As a result,
the taxpayer would receive a check for $5,500 ($6,500 minus the $1,000
owed).
- Instead
of buying a new home from a home builder, I hired a contractor to
construct a home on a lot that I already own. Do I still qualify for
the tax credit?
Yes. For the purposes of the home buyer
tax credit, a principal residence that is constructed by the home owner
is treated by the tax code as having been “purchased” on the date the
owner first occupies the house. In this situation, the date of first
occupancy must be after November 6, 2009 and on or before April 30,
2010 (or by June 30, 2010, provided a binding sales contract was in
force by April 30, 2010).
In contrast, for newly-constructed homes bought from a home builder,
eligibility for the tax credit is determined by the settlement date. Be
sure to check with a tax advisor in cases where a HUD-1 form is not
used at settlement to be sure you have sufficient documentation to
attach to IRS Form 5405.
- Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
Yes. The tax credit can be combined with an MRB home buyer program.
- I am not a U.S. citizen. Can I claim the tax credit?
Perhaps. Anyone who is not a nonresident alien (as defined by the IRS)
and who has owned and resided in a principal residence in the United
States for at least five consecutive years of the eight years prior to
the purchase date can claim the tax credit if they meet the income
limits. For married taxpayers, the law tests the homeownership history
of both the home buyer and his/her spouse. The IRS provides a
definition of “nonresident alien” in IRS Publication 519.
- Is a tax credit the same as a tax deduction?
No. A tax credit is a dollar-for-dollar reduction in what the taxpayer
owes. That means that a taxpayer who owes $6,500 in income taxes and
who receives an $6,500 tax credit would owe nothing to the IRS.
A tax deduction is subtracted from the amount of income that is taxed.
Using the same example, assume the taxpayer is in the 15 percent tax
bracket and owes $6,500 in income taxes. If the taxpayer receives a
$6,500 deduction, the taxpayer’s tax liability would be reduced by $975
(15 percent of $6,500), or lowered from $6,500 to $5,525.
- Is
there a way for a home buyer to access the money allocable to the
credit sooner than waiting to file their 2009 or 2010 tax return?
Yes. Prospective home buyers who believe they qualify for the tax
credit are permitted to reduce their income tax withholding. Reducing
tax withholding (up to the amount of the credit) will enable the buyer
to accumulate cash by raising his/her take home pay. This money can
then be applied to the downpayment.
Buyers should adjust the withholding amount on their W-4 via their
employer or through their quarterly estimated tax payment. IRS
Publication 919 contains rules and guidelines for income tax
withholding. Prospective home buyers should note that if income tax
withholding is reduced and the tax credit qualified purchase does not
occur, then the individual would be liable for repayment to the IRS of
income tax and possible interest charges and penalties.
In addition, rule changes made as part of the economic stimulus
legislation allow home buyers to claim the tax credit and participate
in a program financed by tax-exempt bonds. As a result, some state
housing finance agencies have introduced programs that provide
short-term second mortgage loans that may be used to fund a
downpayment. Prospective home buyers should check with their state
housing finance agency to see if such a program is available in their
community. To date, 18 state agencies have announced tax credit
assistance programs, and more are expected to follow suit. The National
Council of State Housing Agencies (NCSHA) has compiled a list of such
programs, which can be found here.
- HUD allows “monetization” of the tax credit. What does that mean?
It means that HUD will allow buyers using FHA-insured mortgages to
apply their anticipated tax credit toward their home purchase
immediately rather than waiting until they file their 2009 or 2010
income taxes to receive a refund. These funds may be used for certain
downpayment and closing cost expenses.
Under the guidelines announced by HUD, non-profits and FHA-approved
lenders are allowed to give home buyers short-term loans. The
guidelines also allow government agencies, such as state housing
finance agencies, to facilitate home sales by providing longer term
loans secured by second mortgages.
Housing finance agencies and other government entities may also issue
tax credit loans, which home buyers may use to satisfy the FHA 3.5
percent downpayment requirement.
In addition, approved FHA lenders can purchase a home buyer’s
anticipated tax credit to pay closing costs and downpayment costs above
the 3.5 percent downpayment that is required for FHA-insured homes.
More information about the guidelines is available on the NAHB web site. Read the HUD mortgagee letter (pdf) and an explanation of the FHA Mortgagee Letter on Tax Credit Monetization (pdf). An FAQ about monetization (pdf) is available at the NAHB web site.
- If
I’m qualified for the tax credit and buy a home in 2009 (or 2010), can
I apply the tax credit against my 2008 (or 2009) tax return?
Yes. The law allows taxpayers to choose (“elect”) to treat qualified
home purchases in 2009 (or 2010) as if the purchase occurred on
December 31, 2008 (or if in 2010, December 31, 2009). This means that
the previous year’s income limit (MAGI) applies and the election
accelerates when the credit can be claimed. A benefit of this election
is that a home buyer in 2009 or 2010 will know their prior year MAGI
with certainty, thereby helping the buyer know whether the income limit
will reduce their credit amount.
Taxpayers buying a home who wish to claim it on their prior year tax
return, but who have already submitted their tax return to the IRS, may
file an amended return claiming the tax credit using Form 1040X. You
should consult with a tax professional to determine how to arrange this.
- For
a home purchase in 2009 or 2010, can I choose whether to treat the
purchase as occurring in the prior or present year, depending on in
which year my credit amount is the largest?
Yes. If the
applicable income phaseout would reduce your home buyer tax credit
amount in the present year and a larger credit would be available using
the prior year MAGI amounts, then you can choose the year that yields
the largest credit amount.
- How
can two unmarried buyers allocate the tax credit if one qualifies for
the $8,000 first-time home buyer tax credit and the other qualifies for
the $6,500 repeat home buyer credit?
The buyers can
allocate the tax credit in any reasonable manner, provided neither
claims a tax credit higher than the one they qualify for and the home purchase does not yield a total of more than $8,000 in tax
credits. For example, the repeat home buyer could claim $6,500 and the
first-time home buyer could claim $1,500. Alternatively, both buyers
could claim a $4,000 tax credit.
- Does
a married couple qualify for any home buyer tax credit in the following
situation? Spouse A has lived in and owned the same principal residence
for at least five years. Spouse B has lived in and owned the same
principal residence for less than five years.
In this
situation, the couple does not qualify for any home buyer tax credit.
Because the couple is married, the law tests the ownership history of both spouses. Spouse A clearly does not qualify for the $8,000 first-time home buyer tax credit, so neither does Spouse B.
Spouse A does appear to qualify for the $6,500 repeat buyer credit, but
because Spouse B has not owned and lived in the same principal
residence for at least five years, neither of them can claim the repeat
home buyer tax credit.
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