Taxpayers who have claimed the homebuyer tax credits over the last couple of years may have to repay some of the credit, starting with 2010 tax returns. The rules differ depending on which credit you claimed.
$7,500 Credit for Home Purchases Between April 8, 2008 and December 31, 2008
The original First-Time Homebuyer Credit was a credit of up to $7,500 for first-time homebuyers. Anyone who claimed this credit will have to repay the credit over 15 years, starting with their 2010 tax return.
Example
Someone claiming the full $7,500 credit will repay $500 of the credit each year for the next 15 years. The $500 is included as additional tax owed on the back side of Form 1040.
If the home gets sold at any time during the 15-year repayment period, the outstanding amount of the credit is due in full in the year of the sale.
$8,000 or $6,500 Credit for Purchases Between January 1, 2009, and April 30, 2010
Legislation in November of 2009 changed the original First-Time Homebuyer Credit and added a second credit for long-time homeowners who purchased a new home. The First-Time Homebuyer Credit was increased to up to $8,000 for homes purchased between January 1, 2009, and April 30, 2010. Most importantly, this credit no longer had to be re-paid -- as long as the homebuyer lives in the new home for at least 36 months.
The legislation added a $6,500 credit for long-time homeowners who purchased a new home between January 1, 2009, and April 30, 2010. This credit also does not have to be re-paid -- again, as long as the homebuyer lives in the home for at least 36 months.
If the homebuyer doesn't live in the home for at least 36 months, the entire amount of the credit is subject to being recaptured. So, someone who claimed the full $8,000 credit for a first-time home purchase could see their tax bill increase by $8,000 if they sell their home before the end of 36 months.
There are certain exceptions to the recapture rules in situations where the homebuyer dies, is in the military, or sells the home for a loss. It is best to seek the help of a tax professional if you think the recapture rules might apply to you.
Showing posts with label Homebuyer Credit. Show all posts
Showing posts with label Homebuyer Credit. Show all posts
Thursday, January 13, 2011
Wednesday, June 30, 2010
Homebuyer Credit Closing Deadline Extended
The Senate on Wednesday approved an extension of the closing deadline for people who qualify for one of the homebuyer tax credits. Yesterday (June 30) had been the original closing deadline, but the deadline has now been extended through September 30.
The homebuyer credits provide a tax credit of up to $8,000 for first-time homebuyers, and $6,500 for "long-time homeowners" who buy a new house.
The homebuyer credits provide a tax credit of up to $8,000 for first-time homebuyers, and $6,500 for "long-time homeowners" who buy a new house.
Friday, April 23, 2010
Homebuyer Credits and Married Couples
Yesterday I talked about how the Homebuyer Tax Credits work for unmarried people who purchase a home together. Today, I will discuss how the credits work for married couples. As mentioned yesterday, the rules are generally more generous to unmarried people who buy a home together than to married couples who buy a home.
The biggest hurdle that a married couple faces with the Homebuyer Credits is that both spouses must qualify for the same credit in order for the couple to receive the credit. If one spouse qualifies for the first-time homebuyer credit and one spouse qualfies for the long-time homeowner credit, then neither credit is available to the couple.
The qualifications for the first-time homebuyer credit are more straightforward, so I'll start with that. This credit is available to anyone who has not owned a home in the last three years. For a married couple, both spouses would have to have not owned a home in the last three years in order for the couple to qualify.
The qualifications for the long-time homeowner credit are that you must have owned and lived in teh same home for at least five years out of the last eight years. Note the emphasis on "same home." For a married couple to qualify for this credit, both spouses must have had an ownership interest in, and lived in, the same home.
EXAMPLE: "A" and "B" were married in 2009 and they buy a home together in 2010. Prior to buying the new home in 2010, they lived in the house "A" owned. "A" had owned and lived in this house for six years; "B" had never owned a home before. Even though "A" meets the requirements for the long-time homeowner credit and "B" meets the requirements for the first-time homebuyer credit, they cannot claim either credit, because they don't both meet the requirements for either credit.
Confusing? If you think you might qualify for the credit or if you have any questions, you should seek the counsel of a qualified tax professional such as myself.
This article does not constitute tax advice. Because each person's situation is unique, you should consult with a tax advisor before making any decisions.
The biggest hurdle that a married couple faces with the Homebuyer Credits is that both spouses must qualify for the same credit in order for the couple to receive the credit. If one spouse qualifies for the first-time homebuyer credit and one spouse qualfies for the long-time homeowner credit, then neither credit is available to the couple.
The qualifications for the first-time homebuyer credit are more straightforward, so I'll start with that. This credit is available to anyone who has not owned a home in the last three years. For a married couple, both spouses would have to have not owned a home in the last three years in order for the couple to qualify.
The qualifications for the long-time homeowner credit are that you must have owned and lived in teh same home for at least five years out of the last eight years. Note the emphasis on "same home." For a married couple to qualify for this credit, both spouses must have had an ownership interest in, and lived in, the same home.
EXAMPLE: "A" and "B" were married in 2009 and they buy a home together in 2010. Prior to buying the new home in 2010, they lived in the house "A" owned. "A" had owned and lived in this house for six years; "B" had never owned a home before. Even though "A" meets the requirements for the long-time homeowner credit and "B" meets the requirements for the first-time homebuyer credit, they cannot claim either credit, because they don't both meet the requirements for either credit.
Confusing? If you think you might qualify for the credit or if you have any questions, you should seek the counsel of a qualified tax professional such as myself.
This article does not constitute tax advice. Because each person's situation is unique, you should consult with a tax advisor before making any decisions.
Thursday, April 22, 2010
Homebuyer Tax Credits and Unmarried Couples
Unmarried couples in Iowa, and people who are considered unmarried by the federal government (i.e., same-sex couples married under Iowa law) may be able to take advantage of the homebuyer tax credits in ways that married couples cannot. As most of us know, there are two credits available, one for first-time homebuyers and one for long-time homeowners who buy a new house. First-time homebuyers can receive a credit of up to $8,000 for the purchase of a new home, while long-time homeowners can receive a credit of up to $6,500.*
A first-time homebuyer is defined as someone who has not owned a home in the three-year period that ends on the date the new home is purchased. A long-time homeowner is defined as someone who has owned and lived in the same home for at least five consecutive years out of the eight years ending on the date the new home is purchased.
The issue gets complicated when two people buy a home together, and one person qualifies for the first-time homebuyer credit and the other person qualifies for the long-time homeowner credit. For married couples, if one spouse qualifies for one credit and the other spouse qualifies for the other credit, then neither credit is available to the couple. However, this is not the case when the two people are unmarried – or are considered unmarried by the federal government.
Here’s an example, to help make this a little clearer:
Taxpayer A and Taxpayer B, husband and wife, buy a house together. “A” qualifies as a first-time homebuyer; “B” qualifies as a long-time homeowner. Because they are married, they are unable to claim either credit.
Now let’s say “A” and “B” are unmarried. Because “A” qualifies as a first-time homebuyer, the $8,000 credit is available. Additionally, “A” and “B” can split that credit any way they want. The only catch is, “B” cannot receive more than $6,500 (the maximum amount a long-time homeowner can get). So “A” could claim the entire $8,000, or “A” could claim $1,500 and “B” could claim $6,500, or any other reasonable allocation, as long as the total amount allocated doesn’t exceed $8,000 and “B” doesn’t receive more than $6,500.
What is not allowed is for “A” to claim $8,000 as a first-time homebuyer and “B” to claim $6,500 as a long-time homeowner on the same property. The credit is limited to $8,000 total for the property.
As you can see, this can be a complicated issue that is best worked through with the help of a qualified tax advisor. And remember, to qualify for the credit, the purchase contract on the home must be signed by April 30th, and you must close on the home by June 30th.
*-The credit is limited to the lesser of 10% of the purchase price of the home, or $8,000/$6,500.
This article does not constitute tax advice. Because each person’s tax situation is unique, it is recommended that you contact a qualified tax professional for further assistance.
A first-time homebuyer is defined as someone who has not owned a home in the three-year period that ends on the date the new home is purchased. A long-time homeowner is defined as someone who has owned and lived in the same home for at least five consecutive years out of the eight years ending on the date the new home is purchased.
The issue gets complicated when two people buy a home together, and one person qualifies for the first-time homebuyer credit and the other person qualifies for the long-time homeowner credit. For married couples, if one spouse qualifies for one credit and the other spouse qualifies for the other credit, then neither credit is available to the couple. However, this is not the case when the two people are unmarried – or are considered unmarried by the federal government.
Here’s an example, to help make this a little clearer:
Taxpayer A and Taxpayer B, husband and wife, buy a house together. “A” qualifies as a first-time homebuyer; “B” qualifies as a long-time homeowner. Because they are married, they are unable to claim either credit.
Now let’s say “A” and “B” are unmarried. Because “A” qualifies as a first-time homebuyer, the $8,000 credit is available. Additionally, “A” and “B” can split that credit any way they want. The only catch is, “B” cannot receive more than $6,500 (the maximum amount a long-time homeowner can get). So “A” could claim the entire $8,000, or “A” could claim $1,500 and “B” could claim $6,500, or any other reasonable allocation, as long as the total amount allocated doesn’t exceed $8,000 and “B” doesn’t receive more than $6,500.
What is not allowed is for “A” to claim $8,000 as a first-time homebuyer and “B” to claim $6,500 as a long-time homeowner on the same property. The credit is limited to $8,000 total for the property.
As you can see, this can be a complicated issue that is best worked through with the help of a qualified tax advisor. And remember, to qualify for the credit, the purchase contract on the home must be signed by April 30th, and you must close on the home by June 30th.
*-The credit is limited to the lesser of 10% of the purchase price of the home, or $8,000/$6,500.
This article does not constitute tax advice. Because each person’s tax situation is unique, it is recommended that you contact a qualified tax professional for further assistance.
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