First Time Homebuyer Credit

The Tax Attic with Jerry Coon – July 30, 2009

July 30, 2009 // 0 Comments

Do you qualify for the First Time Homebuyer credit? There are some government programs that seem to generate more and more questions. The federal First Time Homebuyer Program is one of those programs. The fact that there is $8,000 in totally refundable dollars at stake might have something to do with creating questions. Taxpayers are trying to fit home purchases into the credit. Some of those purchases do not qualify while some do qualify, but a particular scenario was not considered when the law was enacted and now requires some explanation. Let’s go over some of those instances where the credit is in question. The questions can be grouped in two groups. The first group concerns questions of whether the taxpayer is considered a first-time homebuyer. Did the taxpayer own or constructively own a home within the past two years? Seems like a straight-forward question, but it really isn’t. The second group of questions concerns the purchase. Who did the taxpayer buy the home from or jointly with, and does it qualify for the credit? The first group of questions comes up in conjunction with the requirement that in order to be considered a first-time homebuyer, the taxpayer must not have owned a personal residence for the past two years. For example, a taxpayer owns a personal residence, but five years ago converted that house to a rental when the taxpayer moved into a rented apartment. The taxpayer still owns the rental. Does the taxpayer qualify for the credit even though he/she still owns the prior residence? The Internal Revenue Service says that because the taxpayer did convert the prior residence more than three years ago and has not used the rental as a residence for even one day within the previous three years, he/she does qualify for the credit. Another example involves married taxpayers. A husband and wife have been separated for the last five years and file separate tax returns. The husband has not owned a house during the previous three years. The wife currently has owned and currently occupies a residence. Can the husband claim the credit because they filed separate tax returns, maintain separate households, and he has not owned a residence for the last three years? The IRS says that […]