Obscure Facts About the Home Buyer Tax Credit

Obscure Facts About the Home Buyer Tax Credit

There is always more to the deal than meets the eye.  It is good to know all options and not rely soley on your real estate agent or lender to be your tax expert.  Do not be like the "Cash For Clunkers" crowd who is now learning that they have to pay back $1,500. of that FREE money that the government so willingly forked out for your POC vehicle you traded last year!  This artical ran in the Broker Agent News recently and contains some items of interest for those who utilize the FTHB Tax Credit, their agents and lenders.

Published on Tuesday, November 17, 2009, 8:41 AM Last Update: 5 day(s) ago by Karen Deis Category: All Articles » Economy and Politics » Housing Sector

The IRS gets the final say when it comes to who gets to claim the homebuyer tax credit, who does not, and under what circumstances. They have made a feeble attempt to update some of the FAQs posted on their website http://www.irs.gov/newsroom/article/0,,id=206291,00.html but if it's anything like the last extension, it will take them a while to update their FAQ page.

However, there are some little-known "interpretations" that most loan officers, real estate agents and even tax advisors dont know about.

1. When a FTHB buys a 2-4-family home, and occupies one of the units as their personal residence, they are only allowed to claim 10% (or $8000 max) of the unit they OCCUPY--not the entire sales price. Example: If the FTHB bought a duplex for $120,000 and the units are identical, the "cost basis" is $60,000 and the tax credit they can claim would be $6,000.

2. Income limits are based on ADJUSTED GROSS INCOME.

3. Income CAN Exceed $125,000 (single) and $225,000 (married) by up to $20,000 and FHTB & Long-term Residences can still get a partial tax credit based upon a "MAGI formula" created by the IRS.

4. New Construction - the "date of purchase" is considered the "date" the FTHB OCCUPIES the property--not the closing date or the start-or-construction date.

5. Homes sold on "Land Contract or Contract for Deed" to a FTHB can QUALIFY for a tax credit if they meet 7 tests listed on the FAQs.

6. Tax credit is not available for FTHB in US Territories--only the 50 states.

Practice due diligence and never assume are safe rules of the road for navigating these incentives!