This post is intended to help home buyers determine whether or not the $8,000 First Time Home Buyers Tax Credit applies to their particular situation.  I have taken selected passages directly from the IRS website that explain in detail how the credit is supposed to work.  As always when dealing with tax and financial issues you should secure the assistance of professionals in those fields to best protect your interests.  The tax credit is available to qualified first time home buyers who have a home under contract by April 30, 2010 and close on the home by June 30, 2010.

First let me present some scenarios from the IRS website to help you determine if you are eligible.  These scenarios can be found at this link - First Time Home Buyer Credit Scenarios.

Scenario One:  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?

Answer:  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.

Scenario Two:  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? 

Answer:  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.

Scenario Three:  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?

Answer:  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.

Scenario Four:  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?

Answer:  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.

Here are some questions and answers specifically targeted at persons who make their purchase in 2009.  These questions and answers can be found at this link - First Time Home Buyer Tax Credit Questions and Answers.

Is the IRS currently accepting e-filed returns that claim the new $8,000 homebuyer credit in/for the 2008 tax year?

Answer:  Yes. Taxpayers can file Form 5405, First Time Homebuyer Credit, electronically for home purchases in 2008 to claim the first-time homebuyer credit. IRS began processing these returns electronically on March 30, 2009.

I bought my home in 2009 (early) and filed my 2008 tax return claiming the $7,500 first-time homebuyer credit that has to be repaid. Now the expanded law provides for an $8,000 credit that doesn’t have to be repaid. What do I need to do to get the $8,000 credit that doesn’t have to be paid back?

Answer:  You can file an amended return.

If I purchase a home in June 2009, and have already filed my 2008 tax return, can I amend my 2008 return or will I have to claim it on my 2009 return?  

Answer:  You can either file an amended return to claim it on your 2008 return or claim it on your 2009 return.

I am in the process of buying a home. I expect to close the deal before December 1, 2009. Can I claim the first-time homebuyer credit now? That would allow me to use the refund for a down payment.

Answer:  No. You may not claim the credit in anticipation of a purchase that has yet to happen. Until you have finalized the purchase of your home, which for most purchasers occurs at the time of the closing, you do not qualify for the credit.  IRS news release 2009-27, First-Time Homebuyers Have Several Options to Maximize New Tax Credit, contains details for filing options if the home is purchased after April 15, 2009.

When must I pay back the credit for the home I purchased in 2009?

Answer:  Generally, there is no requirement to pay back the credit for a principal residence purchased in 2009. The ...

This past year has brought a perfect buyer’s market to the Louisville, KY area, and even better, mortgage interest rates are now very low.  This is the time to buy a new home. In addition to low mortgage interest rates, the IRS is offering an $8,000 tax credit to first time home buyers!  Essentially, if you have had any interest in becoming a homeowner, it is time to take action.

The first step in the process of buying a home is to get your finances in order and analyzed by a mortgage lender.  Contact me for recommendations of quality mortgage providers.  You need to ensure you credit report is sound and your credit scores are adequate.  If you have any issues with your finances, you need to begin to take action now to resolve the situation as this market may turn at any time.

The next step when buying a home is to get in touch with me to discuss the market, to develop a home buying strategy, and to begin to search the Louisville MLS for a new home.  I can save you a significant amount of time just through a simple interview process that will help me guide you effectively in your new home purchase.  In addition, I will be able to help you save money and avoid costly mistakes.

To learn more about the process of buying a home in Louisville, KY, and to take advantage of these incredible low mortgage interest rates, contact me today!  It will be my pleasure to assist you…

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