There has been a lot of excitement and confusion about the new tax credit enacted by the Obama administration for first time home buyers. If you have been living under a rock for the last six months, the new administration enacted a new tax credit for first time home buyers for 10% of the home's purchase price, capping out at $8,000. The main difference between this credit and the tax credit given under former President Bush is that the credit for 2009 is not a loan. It does not have to be paid back like the $7,500 tax credit of 2008. It is also a true credit, meaning that if you qualify for the full amount, you would receive a tax refund for the full amount.
There are a lot of questions about eligibility, what the money can be used for and how long it takes to get it. So let's take a look at some of the more common questions people have.
Can I buy a home from a parent or other relative and still receive the credit?
The simple answer to that question is no. Per IRS 5405, you cannot receive the credit if you buy a home from a parent, grandparent or other lineal relative. So that means that a parent couldn't buy a condo from their children or grand children and expect to collect the credit from the government.
I sold my home in 2006 and have been renting since. Do I qualify for the credit?
This is a fairly simple to figure out. Eligibility depends on when in 2006 you were no longer a property owner per the deed on the property. The three year period would start from the moment you no longer owned the property. For example, if you sold your home June 1, 2006 then you would be eligible as a first time home buyer on June 2, 2009. Of course, you would still need to meet the other eligibility requirements as well.
I'm financing the house with my parents who are on the loan. Can I still claim the credit?
The credit eligibility guidelines talks about property ownership specifically. It does not say anything about who is on the property loan. As long as you are the sole person on the deed (or with your spouse), meet all of the eligibility requirements, you can claim the credit. Nowhere in the IRS guidelines does it state that a loan co-signer will disqualify you from claiming the credit.
I’ve filed an amendment to my 2008 to claim the credit. How long does it take to receive it?
According to the IRS, it takes about 8 to 12 weeks. The check will be mailed to you; the IRS will not do a direct deposit.
So what's the bottom line? Talk to a qualified tax specialist if you aren't sure you qualify (and are claiming the credit). Notice I said qualified tax specialist. Finding someone that does taxes on the side on Craigslist that isn't a certified public accountant or tax attorney probably isn't the best idea. Making a mistake and finding out later that you have to pay back the credit is not something you want to have to do.
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