East Bay First Time Home Buyers – Claiming the $8,000 Tax Credit

Earlier today home builder Lennar Chicago posted a terrific, informative blog post cautioning home buyers to avoid possible problems in claiming the home buyer tax credit.

Anyone who has bought a home recently and has or is planning to claim the up to $8,000 tax credit would do well to read the post in its entirety to see if any of the issues apply to their circumstances.

The first step, of course, is to enlist the services of a qualified tax professional. Since the credit can only be claimed through traditional paper filing, it only makes sense to consult a professional who can guide you through the process. With that said, here are some prominent issues that have been raised regarding the tax credit.

• You occupy your new home but your parents bought it for you (and/or they secured financing in their name only). Can you still claim the credit? Yes, but you must approach claiming the credit properly. See the above post for more info and consult your tax professional.
• You were single when you purchased the home and your income was within the income limits allowable to claim the credit but during the year you were married to someone whose income exceeds the limits and/or your combined income now exceeds the limits. Can you still claim the credit? Surprisingly, yes. The credit is based upon your status as of the date of sale according to the IRS. You will need to bring specific supporting documentation to your tax professional to prove the validity of your claim.
• You have recently bought the home that you had been renting in previous years through a lease option- do you qualify for the tax credit? Yes, if you have not owned a home (principal residence) in the previous three years, and you meet all other requirements set forth by the IRS, you would be considered a first time home buyer and may qualify even if you were previously renting the house you have purchased.
• What about landlords? As long as you have not owned a principal residence in the past three years, you may qualify for the credit. There is no limit to how many rental/income properties one may own to qualify as a first time home buyer. You may have to provide proof that you have been renting your principal residence for the past three years. Consult your tax professional.
• Have a unique situation not addressed here? Check out the IRS's web page of other first time home buyer tax credit scenarios here. You just may find your question answered!

What if you qualify for the credit but haven't found a house yet? Time is running out. To be able to claim this credit, you must be in contract on a purchase by April 30^th, 2009 and must complete the sale and occupy the home by June 30^th, 2009. However, if you can't make this timeline and you live in California, you may be able to take advantage of the new state tax credit which is set to go into effect for qualified homes and home buyers who purchase between May 1^st and December 31^st, 2010.

                        

          

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