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First Time Home Buyers $8000 Tax Credit Explained

By
Real Estate Agent with Long & Foster - Wayne/Devon, Pennsylvania

Currently it’s a great time to be a first time homebuyer on the Main Line, or any where in the United States for that matter.  The main reason being the new first time homebuyers $8000 tax credit that is retroactive to January 1, 2009 and lasts until November 30, 2009.  How does the $8000 tax credit work?  Basically, if you purchase your first home within the time period mentioned above, when you file your taxes next year you will receive a refund check for $8,000 if you do not owe any taxes.  If you owe $3000 in taxes then you will receive a refund check of $5000.  Unlike the first time homebuyers $7500 tax credit that went into effect April 8, 2008, you do not have to repay this tax credit back as long as you remain in the home for three years.  This tax credit, along with 30-year interest rates being at 4.98% should remove any doubt that this is a great time to purchase your first home on the Main Line.

If you have never owned a home or if you have not owned a home or had any ownership interest in a home in the past three years, then you are considered a first time home buyer.  If you are married, both parties have to be first time homebuyers.  The home you are purchasing has to be where you will reside over 50% of the time and within the United States.  It can be a condo, townhouse, co-op, or a single-family residence.  If the home is new construction you have to be moved in by December 1, 2009.  It cannot be a vacation home or rental property. The purchase price has to be over $80,000 to receive the full $8000 credit.  If the purchase price is less than $80,000 then the credit is 10% of the purchase price.

There are some exclusion’s however.  Even if you are a first time homebuyer, you will not qualify for the tax credit if your modified adjusted gross income is above $95,000 or if jointly it is above $170,000. You are also excluded if you have purchased your home from a close relative such as a parent, grandparent, spouse, child, or grandchild.  Also, you cannot be a nonresident alien.  The good news is that most first time homebuyers will qualify and will receive a huge benefit from purchasing their first home in 2009.

The new $8000 first time homebuyers credit, historically low interest rates, large inventory of homes at great prices makes this the best market in a long time for first time homebuyers on the Main Line.

 

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Anonymous
Marla

I'm planning on buying a home from my spouse's grandmother. If I am the sole buyer, can I qualify for the credit? Does it matter that I'm married to a relative of the seller or does my spouse disqualify me in this case?

 

Thanks!

Apr 23, 2009 03:45 AM
#26
Sarah Adams
Long & Foster - Wayne/Devon, Pennsylvania - Tredyffrin, PA

Dave,

 

Your son would qualify for the credit if he meets the income amount and has not owned a home in the past three years. Home buyers who are not married may allocate the credit as they deem reasonable. In your case, the entire amount should be allocated to your son since he qualifies as a first time home buyer and would be the only one who could benefit from the tax credit.

 

Thank you for your question,

Sarah Adams

www.SarahSellsTheMainLine.com

 

 

 

 

 

Apr 23, 2009 04:38 AM
Sarah Adams
Long & Foster - Wayne/Devon, Pennsylvania - Tredyffrin, PA

Marla,

 

Because this is your spouse's grandmother, I don't think you would qualify for the tax credit even if you are going to be the sole buyer. Any purchase of a primary residence or interest in a primary residence that is owned by a relative such as a mother, father, sibling, grandmother, grandfather, aunt or uncle does not qualify for the credit. I would think the irs would consider you related but you may want to ask a professional accountant or contact the irs to make sure.

 

Thank you for your question,

Sarah Adams,

www.SarahSellsTheMainLine.com

Apr 23, 2009 05:06 AM
Sarah Adams
Long & Foster - Wayne/Devon, Pennsylvania - Tredyffrin, PA

Joel and Lou,

I am sorry for taking so long to answer your questions concerning duplexes. It has taken a while to find out the standings on duplexes and how the credit would be handled. Buying a duplex as your first home would qualify you for the credit.  The price of the duplex would be split in half for the tax credit if you were buying a duplex and into fourths if you were buying a unit with three other units attached. So in order to get the full $8000 credit, you would need to purchase a duplex for $160,000 or more. If you bought a duplex for 100,000 then half of 100,000 would be 50,000 and 10% of 50,000 would be 5,000 so your tax credit amount would be $5000. The same math would apply to a quadplex. The price of a quadplex would have to be $320,000 or more to get a $8000 credit. The credit is 10% of the sales price up to $8000.

I hope this helps. Again, I apologize for the delay.

Thank you for your questions,

Sarah Adams

www.SarahSellsTheMainLine.com

Apr 23, 2009 08:33 AM
Anonymous
ash

My husband and I are buying a duplex with my brother.  The property has two houses on one lot.  We will be using one unit as our primary residence while my brother occupies the second unit as his primary residence.  All three of us are first-time homebuyers.  Would we qualify for two credits - one for each household? Thoughts are appreciated!

Apr 25, 2009 05:49 AM
#30
Anonymous
Ruth

Hi,

I have never owned a home before and live with my boyfriend where I do not pay rent.  I just purchased a home aboput 200 miles from where I live and it was mortgaged as a second home even though I have never owned a home before in my life.  I will be living in the new home summers and weekends.  Do I qualify as a first time home buyer and will I get the 8000 dollar tax credit?

Thanks!!

Apr 29, 2009 01:39 AM
#31
Anonymous
Aaron

Sarah,

I do NOT qualify for the first-time homebuyers credit. However, my dad does. What if he buys a home this year and lives in it with me until early 2010, for example. He files his 2009 taxes next year and gets the tax credit. He then transfers ownership to me and moves out. What happens then? I have read that you have to pay back the credit/rebate if you SELL within 3 years, but what about transferring it to me (a child) in the timeframe I outlined?

Thanks in advance,
Aaron

May 01, 2009 04:18 AM
#32
Anonymous
connie

we have been told by a loan officer that the tax credit does not apply to new construction unless  our builder actually takes out the loan in his name while building it and then we buy it from him. Is this true?  Also, he says that the tax credit has been extended until the middle of 2010. Is this true? Thanks

May 24, 2009 02:16 AM
#33
Anonymous
fabian sanchez

Hello im a hope to be first time home buyer and would like to know if the $8000 dollar tax credit could be used for closing costs?

Jun 08, 2009 10:41 AM
#34
Anonymous
Nora

I have a question about answer #29 above.  This is so confusing... I just spoke directly with the IRS and was told that if you buy a multi-family home and occupy one unit as a primary residence and rent out the others, the entire purchase price of the house is eligible for the tax credit. Could you please give the reference where you found this information?  It could be their rep was mistaken.  Oddly enough, I can't find any specification on the IRS website about dividing the purchase prince in this situation. It just says any purchase used as a primary residence is eligibe. Thank you so much for you help.

Jun 26, 2009 04:09 AM
#35
Anonymous
Mike

Hi,

I have a question. I bought a house in June , it is under my name and I do not quailfy for the 8000 tax credit because of my income. However, I am getting married in September; if me and my fiance file jointly after we get married we will qualify based on income.  Will we qualify for the tax credit if I bought the house first then got married and it's just under my name?

Thanks!

Jul 12, 2009 05:22 AM
#36
Anonymous
DIANE

I OWN A CONSTRUCTION COMPANY (BUILDING AND REMODELING) IN WHICH I AM THE MAIN SHAREHOLDER.  MY QUESTION IS IF WE BUILD A HOUSE AND SELL IT TO MY SON WILL HE QUALIFY FOR THE $8000 TAX CREDIT.

Oct 22, 2009 08:37 AM
#37
Anonymous
Nora

Diane, the IRS does specify that the first time home owner who purchases from family isn't eligible.

Oct 22, 2009 08:54 AM
#38
Anonymous
Warren

If the parents buy land in their name, construct a house and then transfer it to their son (who repays their cost with a note payable to the parents), can the parents be treated as a nominee owner for the son who would then qualify for the credit?

Oct 23, 2009 04:54 AM
#39
Anonymous
Nora

Warren, I would recommend you call the IRS and ask them. Here's a page with links to information: http://www.irs.gov/newsroom/article/0,,id=187935,00.html.   Sounds to me like your situation would be considered as "buying from a close relative" and therefore not eligible, but I'm no expert, I'm just a person who asked an unanswered question last June, but I thought that link might help you :-)

Oct 23, 2009 05:27 AM
#40
Anonymous
Warren

Thanks, Nora.

Oct 23, 2009 05:33 AM
#41
Anonymous
Sarah Adams

Warren, Nora, and Diane,

 

You can NOT purchase a home from a relative and qualify for the tax credit. Please see www.federalhousingtaxcredit.com. It states:

It is important to note that you cannot purchase a home from your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren, etc.) or your spouse. Please consult with your tax advisor for more information. Also see IRS Form 5405.

Diane, I would talk to the IRS to make sure since you are a partner in a company. Anyone with a unique situation should contact the IRS to make sure they qualify since the rules are constantly being updated or added.

 

You can purchase a house WITH a relative and qualify. The above mentioned website states:

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, unmarried joint purchasers may 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.

 

As of right now, the deadline is NOVEMBER 30, 2009. The closing needs to have occured and the title of the property needs to be in your name before DECEMBER 1, 2009. Hopefully, the first time tax credit will be continued.

Thank you for your questions,

Sarah Adams

www.SarahSellsTheMainLine.com

Oct 23, 2009 05:49 AM
#42
Anonymous
Nora

Hi Sarah, thank you for your answer.  Could you please take a look at my question above, as well, about owner-occupied property? The IRS told me that this type of property is considered a first home and is eligible for the tax credit on the whole amount of the property, but from other sources I've gathered that this is thought to be untrue, so I'm still wondering. Thank you!

Oct 23, 2009 06:02 AM
#43
Anonymous
Sarah Adams

Nora,

In regards to your question in June, I would go with what the IRS tells you and keep the name of the person giving you the answer. My research usually comes from government websites but there was not a lot of information on duplexes. I had to gain my information from different rescourses. The government sites may have more information on duplex purchases now.

If anyone has a unique situation, I would go to the www.irs.gov site and try to find the answer or contact them directly. I would just write down the name of hte person you talked to and the date and time of your conversation  for your records in case any questions arise about your tax returns.

 

Thank you,

Oct 23, 2009 06:11 AM
#44
Anonymous
Nora

Thank you, Sarah.  That's good advice. I've been trying to research it, and it's surprising that it isn't spelled out more clearly by the IRS, since it's quite common for the owner of a property to want to occupy an apartment.  I don't think I kept the name of the person with whom I spoke, but maybe I'll call again and see if I get a different answer.  Thanks, again :-)

Oct 23, 2009 06:27 AM
#45