26 Responses to “New Home Buyer Tax Credit- Q & A”

1. Jamie
   July 22nd, 2009 @ 9:04 pm

   I was wondering if you could answer a question? My husband and I bought our house in November of 08, and we took advantage of what we thought was a good opportunity, and got the 7500 dollar tax credit. The IRS took 5,000 of it for my husbands past due student loans. Now if it was a loan that we have to pay back then how could the government have taken our money.

2. Matt
   July 23rd, 2009 @ 3:56 pm

   The $7,500 (or $8,000) is a tax credit, not a loan. It is a reduction of your 2008, tax liability, which assumes that you paid at least $7,500 in federal income taxes in 2008. Congress is allowing you to get a “refund” of those 2008, taxes, because you’re buying a new home.

   The IRS must have had a lien against your future refunds, credits, etc. in order to recover your husband’s unpaid loan. Clearly, you owed the $5,000 loan and must have been late in making loan payments. The IRS does not have to pay you your tax credit of $7,500, until you have first paid your obligations on the federally-backed loans. In other words, you owed the federal government $5,000, so the government took its $5,000 first, before it gave you the rest of the $7,500 credit.

   It wouldn’t make sense for the IRS to cut you a check for $7,500, if you owed the IRS/federal government money.

   YOU MADE THE RIGHT DECISION. In essence, you bought a new home and the IRS repaid your husband’s late loan payments for you. What a great deal! Thank the IRS for paying your debts and giving you another $2,500 for buying a home.

   -Matt

3. KG
   August 13th, 2009 @ 11:36 am

   Matt,

   I found your website to be very helpful, so I thought you might be able to help me with my New Homebuyer Tax Credit Question.

   My wife and I got married in August 2009. We plan on buying a home and would like to take advantage of the tax credit.

   Our 2009 incomes completely eliminate us from the tax credit.

   In 2008 (when we weren’t married), we had very small incomes (both were students for most of the year).

   Essentially, we will be buying a house in 2009 as a married couple, but are looking to amend our 2008 tax returns (which were filed separately because we were not married then) to take the tax credit.

   We have done extensive online research on this, but have not found any answers on whether we can take the tax credit this way.

   Do you have any guidance?

   Thanks.

4. Mickey Brooks
   August 13th, 2009 @ 4:14 pm

   KG,

   Thanks for opportunity to repond to your need for more information.

   Your situation is a little tricky, but as I understand the rules, you probably can not take the credit in this manner. Some of the following seems contradictory so you should always contact your CPA or other tax advisor for your specific situation.

   Here’s why I believe you can not claim the credit.

   First, here are the pertinent requirements to claim the tax credit:

   1. Eligibility for the first-time homebuyer credit is determined on the date of purchase. I’ll assume both you and your wife qualify by not having owned a principal residence in the previous 3 years. The credit is available for a home purchased after April 8, 2008, and before Dec.1, 2009. You’ve not purchased a home as yet and must do so by November 30, 2009 to qualify under this rule.

   2. Since you are now married, you qualify for the full credit only if your joint income in 2009 is $150,000 or less. You can claim a reduced tax credit if your income is up to $170,000 (MAGI – Modified Adjusted Gross Income). You indicated that your 2009 income disqualifies you for the credit.

   3. Considering the two above rules, you will only qualify for the credit if you buy a home between now and November 30, 2009 and your joint income is below $150,000 – $170,000.

   4. There is a situation where you could buy the home in 2009 and be able to amend your 2008 return to get the tax credit. The law allows taxpayers to choose (“elect”) to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns).

   Qualified taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.

   So, per number 4 above, why can’t you re-file the 2008 tax return to claim the credit? It’s because of the tricky little issue of “qualified home purchases in 2009”. Since the tax credit is available based on when you bought the home (assume October 2009), your income is therefore counted for that tax year (2009)and your purchase was not a “qualified purchase” – your income is too high.

   So, when would this situation work for a home owner? Assume a couple meet all the other first time home buyer rules, make joint income of $150,000, and buy a new home in June 2009. Because they meet the qualifying criteria, they could amend their 2008 tax return to claim the tax credit early. They would then not have to wait until they filed their 2009 return in 2010 to receive the benefits of the program.

   Here are links to 3 helpful sites that may be of assistance to you.

   http://www.irs.gov/newsroom/article/0,,id=204672,00.html
   http://www.irs.gov/taxtopics/tc612.html
   http://www.irs.gov/pub/irs-pdf/f5405.pdf

   -Mickey

5. SK
   August 29th, 2009 @ 6:30 pm

   Hi Matt,
   I am hoping you are able to answer a question for me… I bought a house in my name only before I married my husband. We sold our house and will now be buying a new house only in his name. Do we qualify for the tax credit since we weren’t married when I purchased our last house?

6. Beth
   October 29th, 2009 @ 4:41 pm

   Matt,

   My husband and I are closing on our new home on Friday (Oct.31,2009). If I want to try and get the $8,000 tax credit right away I can file an amendment for my 2008 tax return, correct? If so do I need to send everything I sent in 2008 and the IRS form 5405, or just the form 5405?

   This leads me to my next questions since my husband and I were not married in 2008, do we both need to submit this form or will one work?

   Thanks in advance.

7. Sheryl
   November 5th, 2009 @ 9:08 am

   My mother and I are coborrowers on a mtg. We are purchasing my mother-in-laws house. I know I do not qualify for the tax credit, but would my mother be able to get it? I don’t know if the IRS considers my mother to be a relative of my mother-in-law? Any advice would be appreciated.

8. Rick
   November 9th, 2009 @ 11:58 am

   Matt – With the new tax credit being extended and now current home owners having an option. My questions is do the people selling there home have to be owner occupied on the same property for 5 year? Or can they have owned one for 3 years and one for 2 years so they have been for a total of 5 years?

9. Mickey Brooks
   November 13th, 2009 @ 5:23 pm

   Rick,

   Thanks for your question.

   Because the President just signed this bill a couple of days ago, there is generally very little detailed information about the “rules”.

   Eventually, the GSE’s (Government Sponsored Entities) Fannie Mae and Freddie Mac will develop the underwriting rules that will allow mortgage lenders to process loans under the new rules.

   Until then all I can offer you in the way of advice comes from the text of the Bill.

   The section that is of importance to you amends Section 36 of IRS Code 1986. Here are the two pertient paragraphs from that amendment:

   “In the case of an individual (and, if married, such individual’s spouse) who has owned and used the same residence as such individual’s principal residence for any 5-consecutive year period during the 8-year period ending on the date of the purchase of a subsequent principal residence, such individual shall be treated as a first-time homebuyer for purposes of this section with respect to the purchase of such subsequent residence.”

   “In the case of a taxpayer to whom a credit is due under the above noted section, the taxpayer is allowed to be treated as a first time homebuyer and the credit available shall be $6,500 instead of $8,000 (married)and $3,250 instead of $4,000 (single).”

   That indicates to me that you and your spouse would have to occupy a single and same residence for at least 5 consecutive years during the last 8 years to take advantage of the credit.

   Stay tuned though as I’ve seen interpretations by underwriting seldom mirror the words in the Bill.

   - Mickey

10. Mickey Brooks
    November 13th, 2009 @ 5:32 pm

    Sheryl,

    Hi!

    My advice is to follow the link below and you will be able to view the relationship requirements right on the front of the form.

    When you get to the above link, there is now a note indicating that due to the changes implemented with the new Bill signed in November 2009, the IRS will issue a new 5405 and who knows how the rules will change…

    http://www.irs.gov/pub/irs-pdf/f5405.pdf

    - Mickey

11. Matt
    November 16th, 2009 @ 7:33 pm

    Mickey-

    Chris, who is a missionary serving overseas, has a questions as well.

    thanks.

    -Matt

12. Ryan
    November 22nd, 2009 @ 8:51 pm

    My girlfriend and I are both planning to purchase my parents house. I know I am not eligible for the tax credit, but unsure about my girlfriend. So can she claim the credit even if she is jointly purchasing the house with someone who is a direct relative of the seller? If she cannot, where is this spelt out? Having a hard time finding information for this scenario.

13. Robert
    January 15th, 2010 @ 8:34 pm

    My wife and I purchased our first home in October 2008. We also took advantage of what we thought was a great deal with the $7500 credit to be repaid. Now the deal is even sweeter. There have been numerous people saying we can refile last years taxes and get a partial credit for the Extended Home Buyer Credit for those people who have bought in the last 5 years. Is this correct? Also, since the new credit does not have to be repaid, is there no way to get around the $7500 that we owe? Thanks for your help!

14. Gopal Krishan
    January 21st, 2010 @ 6:37 pm

    Matt – I bought a house on 01/28/2009 and had immediately filed my tax papers, getting a refund of $7500. I also got to know that I was eligible for $8000 refund as per the new ruling, but unfortunately was not able to file amendment for my tax returns. Can i claim the remaining $500 on when i file tax returns for 2009??

    Gopal

15. Matt
    January 28th, 2010 @ 7:59 am

    Gopal-

    I think you’re confusing the $7500 program and the replacement $8000 program. The two programs are different in several ways, even though both are part of the New Home Buyer Credit law. For example, the $7500 is more like a loan from the government that must be repaid. The $8000 is a tax credit.

    I consulted with several knowledgable experts in this field and reviewed the statute, and I cannot find a provision in the law allowing you to “switch” programs and get the extra $500. Sorry.

    -Matt

16. Roberta
    February 1st, 2010 @ 9:55 am

    My husband & I lost our home in May 2008. We were able to buy a house with my husband’s annuity & paid cash for it in August 2009,would we be able to use the tax credit when we do our taxes? We have both been laid-off for over a year(I was laid-off Sept’08 & my husband Dec.’08.I hope you will be able to give us some good news.

17. Matt
    February 2nd, 2010 @ 1:41 pm

    Roberta-

    I talked to Mickey Brooks- mortgage consultant extraordinnaire- and he and I agree that you would not be eligible for either tax credit, given the information you provided. Don’t rely on this response, however. I might not have all the information to advise you. Seek independant legal or tax counsel. With that warning, consider this:

    You are not eligible for the first time home buyer $8,000 credit because you owned a home in 2008.

    Per the terms of the existing homeowner credit ($6,500), the law goes into effect for purchases after the date of enactment (when the bill is signed). There is no reference to the “date of contract” for the new credit. The law looks solely to the date of purchase, which is generally the date of settlement. This credit is available for home purchase settlements between November 7th, 2009 and April 30th, 2010.

    Sorry, but unfortunately I don’t think you qualify for either credit. Again, seek independent legal or tax advice to review all the facts of your situation.

    Thanks always to my friend, Mickey Brooks, for help concerning all things mortgage-related.

    Mickey Brooks
    Mortgage Planner
    JLB Mortgage Group
    11769 Whisper Bay Ct
    Carmel, IN 46033
    317.218.0283 (Office)
    317.218.0291 (Fax)
    888.249.4003 (Toll Free)
    mbrooks@jlbmortgagegroup.com
    http://www.jlbmortgagegroup.com

18. Matt
    February 3rd, 2010 @ 12:28 pm

    GUEST RESPONSE-

    Robert,

    Sorry for the delay in responding to your question.

    There are many requirements to be able to claim any of the 3 tax credits Congress approved in 2008 and 2009.

    This response will only address the issues you brought forward.

    First, the date of purchase is the most significant factor in determining if you qualify for a tax credit at all.

    For the $7,500 tax credit, which was enacted in July 2008, you must have purchased your first home between April 2008 and December 31st 2008. You qualify for that credit and apparently have filed for it on your 2008 tax return.

    To claim the $8,000 tax credit you must have purchased your first home after December 31st 2008. You do not qualify for this credit and can not re-file your 2008 return to claim it.

    To claim the $6,500 tax credit (Long Time Resident of the Same Main Home), you must have owned and lived in your previous main home for a minimum of 5 consecutive years in the last eight years prior to the purchase date of your new home and, the new purchase must have occurred after November 6th, 2009. Therefore, unfortunately you don’t qualify for this tax credit either.

    Please remember to always contact a qualified tax professional for assistance in these matters.

    Best regards,

    Mickey Brooks
    Mortgage Planner
    JLB Mortgage Group
    11769 Whisper Bay Ct
    Carmel, IN 46033
    317.218.0283 (Office)
    317.218.0291 (Fax)
    888.249.4003 (Toll Free)
    mbrooks@jlbmortgagegroup.com
    http://www.jlbmortgagegroup.com

19. greg rogers
    February 18th, 2010 @ 9:06 am

    I am getting a divorce april 2010. I will be closing on my house this year march 2010. Ex wife will be keeping our house we shared for the past 4 years. Will i qualify for a tax credit.

    Thanks
    Greg

20. Matt
    February 18th, 2010 @ 5:23 pm

    Greg- Here are some thoughts from a local mortgage consultant I highly trust-

    I assume he means will he qualify on the new home he is buying in March 2010 by himself. If so, he doesn’t qualify for the $6,500 tax credit because he only lived in his previous home for 4 years. The tax credit requires you live in the previous home as a primary residence for 5 consecutive years out of the past eight. Of course he does not qualify for the first time home buyer tax credit because he has owned a home in the most recent three years. I don’t see any way to claim the credit with the limited information provided.

    Best regards,
    Mickey Brooks
    Mortgage Planner
    JLB Mortgage Group
    11769 Whisper Bay Ct
    Carmel, IN 46033
    317.218.0283 (Office)
    317.218.0291 (Fax)
    888.249.4003 (Toll Free)
    mbrooks@jlbmortgagegroup.com
    http://www.jlbmortgagegroup.com

21. Angelique M. Ehat
    March 15th, 2010 @ 12:59 am

    Hi Matt,

    My husband and I purchased a home in Ca in October and have qualified for the $8k Tax credit. Now it looks as if my husband may be taking a job in NV so we may need to move and either rent or sell the home we just purchased. Will we have to repay the $8k if we sell? rent? I was told there was a 36 month clause but have not been able to find any of the details.

    Thank you!!

22. Dianne Lovell
    March 15th, 2010 @ 1:17 pm

    I bought a house with another person in Dec. 2008. I was only in the house until October. 2009 due to a breaking of the relatonship (violence was involved). I bought a new home in 2009. This is the first time I’m buying a house myself. I was told because I was in the previous home such a short time and I was forced to move, I could claim the new home owner’s tax credit. I was to make sure this is true.

    Thanks.

    Dianne

23. Mickey Brooks
    March 16th, 2010 @ 1:16 pm

    Angelique,

    Thanks for your question about repaying the tax credit. There is in fact a requirement to repay the credit during the first 36 monhs after purchase. The details can be found in the instructions for completing IRS Form 5405 – the document you attach to your Federal Tax return to claim the credit. You can review the instruction document for more information, but here is the pertinent data that fits your situation:

    Repaying the Credit (for Purchases After 2008)

    If you purchased the home after 2008, you generally must repay the credit if, during the 36-month period beginning on the purchase date and after the year for which you claim the credit, you dispose of the home or it ceases to be your main home. This includes situations where you sell the home, you convert the entire home to business or rental property, the home is destroyed, condemned, or disposed of under threat of condemnation, or the lender forecloses on the mortgage.

    You repay the credit by including it as additional tax on the return for the year you dispose of the home or it ceases to be your main home. However, if the home is destroyed, condemned, or disposed of under threat of condemnation, and you do not acquire a new home within 2 years of the event, you must repay the entire repayment amount with the return for the year in which the 2-year period ends.

    If you own the home and use it as your main home for at least 36 months beginning on the purchase date, you do not have to repay any of the credit or file Form 5405 again.

    If you and your spouse claim the credit on a joint return, each spouse is treated as having been allowed half of the credit for purposes of repaying the credit.

    Exceptions. The following are exceptions to the repayment rule.

    • If you sell the home to someone who is not related to you, the repayment in the year of sale is limited to the amount of gain on the sale. The amount of the credit in excess of the gain does not have to be repaid. (Be sure to check the relationship documentation for the definition of a related person). When figuring the gain, reduce the adjusted basis of the home by the amount of the credit.
    • If the home is destroyed, condemned, or disposed of under threat of condemnation, you do not have to repay the credit if you purchase a new main home within 2 years of the event and you own and use it as your new main home during the remainder of the 36-month period.
    • If, as part of a divorce settlement, the home is transferred to a spouse or former spouse, the spouse who receives the home is responsible for repaying the credit if, during the 36-month period beginning on the purchase date, he or she disposes of the home or it ceases to be his or her main home and none of the other exceptions apply.

    Hope this helps you out…

    Mickey

    Mickey Brooks
    Mortgage Planner
    JLB Mortgage Group
    11769 Whisper Bay Ct
    Carmel, IN 46033
    317.218.0283 (Office)

24. Mickey Brooks
    March 16th, 2010 @ 2:31 pm

    Dianne,

    Thanks for your question.

    As I read the requirements for claiming the tax credit or for being exempt from having to pay it back, there is no provision for living in the home a short time.

    You should talk with a tax advisor to determine if there is any relief for your situation.

    Mickey

    Mickey Brooks
    Mortgage Planner
    JLB Mortgage Group
    11769 Whisper Bay Ct
    Carmel, IN 46033
    317.218.0283 (Office)

25. Matt
    March 16th, 2010 @ 5:30 pm

    THANKS MICKEY!

26. ken
    April 16th, 2010 @ 5:59 pm

    what is the latest I can file a amended 2008 return for the home I bought in 2008

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