When in doubt, go to the source. There is so much confusion and misunderstanding about the first time home buyers tax credit these days. I know that if I am unsure if buyers will qualify, the people to ask are the mortgage lenders and tax professionals.
This set of scenarios and answers is from Steve Bechtolt, vice president of residential lending here at Wisconsin Community Bank in Monroe. Steve and the people at WCB are very helpful, and I would not hesitate to recommend any of them to buyers looking for financing.
First-Time Homebuyer Credit: Scenarios
Q. If a single person (Taxpayer A) qualifies as a first-time homebuyer at the time he/she purchases a home with someone (Taxpayer B) that is not a first-time homebuyer and then later that year they marry each other, is the credit still allowed?
A. Eligibility for the first-time homebuyer credit is determined on the date of purchase. If Taxpayer A, a first-time homebuyer, buys a house and then later that year marries Taxpayer B, not a first-time homebuyer, the credit is allowable to Taxpayer A. Taxpayer A may take the maximum credit.
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.
Q. A taxpayer owned her principal residence. Several years ago, she decided to relocate to a rented apartment, but did not sell the former residence. Instead, she rented it out to tenants. Now the taxpayer plans to buy another house and make it her new principal residence. Does she qualify for the first-time homebuyer credit?
A. A taxpayer who owned rental property within the past three years is still eligible for the credit. The taxpayer cannot have owned and used a home as his or her principal residence within the last three years.
Q. If husband and wife wanted to sell the home that the wife owned when they got married, and the husband had not owned a home within the past three years, could he qualify as a first-time homebuyer for the credit even though the wife would not qualify?
A. No. The purchase date determines whether a taxpayer is a first-time homebuyer. Since the wife had ownership interest in a principal residence within the prior three years, neither taxpayer may take the first-time homebuyer credit. Section 36(c)(1) of the Internal Revenue Code requires that the taxpayer and the taxpayer's spouse not have an ownership interest in a principal residence within the prior three years from the date of purchase. The husband may not take the credit even if he filed on a separate return.
First time home buyers, there is a lot more flexibility with the tax credit than some people have been thinking. This is a great time to purchase, so if you are thinking of moving in to home ownership, come talk with us or any of the local lenders about getting started in the home buying process.