First Time Homebuyer Tax Credit
The first time homebuyer tax credit is no longer allowed by the IRS.
Housing Assistance Tax Act of 2008
Originally, The Housing Assistance Tax Act of 2008 provided a tax credit for “first-time homebuyers” who purchase a principal residence in the United States after April 8, 2008, and before July 1, 2009. The tax credit was then extended to those who purchased a principal residence in the United States through April, 30 2011. Unfortunately, the first time homebuyer tax credit is not available anymore.
First-Time Homebuyer Tax Credit Restrictions
Restrictions for the credit were:
- 1. Your modified adjusted gross income (AGI) is $125,000 or more ($225,000
or more if married filing jointly).
- 2. The purchase price of the home must be $800,000 or lower.
- 3. Your home financing comes from tax-exempt mortgage revenue bonds.
- 4. You are a nonresident alien.
- 5. Your home is located outside the United States.
- 6. You acquired your home by gift or inheritance.
- 7. You acquired your home from a related person.
First Time Homebuyer Tax Credit Amount
Generally, the credit amount is the smaller of:
- $8,000 ($4,000 if married filing separately.
- 10% of the purchase price of the home.
Repayment of the First Time Homebuyer Tax Credit
While the term “credit” is used, it’s really a misnomer because the person who received the credit really an interest-free loan from the government. It must be repaid in most cases.
Homes purchased in 2008:
The 2008 credit for a home purchased after April 8, 2008 and before January 1, 2009 generally must repaid over a 15-year period in 15 equal installments beginning with 2010 returns. Assuming the home is owned as a principal residence, the purchaser must continue to repay 1/15 of the 2008 credit each year of the 15-year period.
The 15 year repayment run for the first time homebuyer tax credit assumes that the purchaser still owned the home and used it for all of 2014 as their principal residence. If the purchaser sold the home or changed the use of it, repayment of the rest of the credit is generally accelerated, meaning that the balance must be repaid with the purchasers 2014 return. However there are exemptions:
Exemption to repayment of homebuyer tax credit example 1: If the purchaser sold the home in 2014 to an unrelated party and there is a gain on the sale that is less than the credit the purchaser claimed, the repayment amount is limited to the gain; the excess of the credit over the gain does not have to be repaid.
Exemption to repayment of homebuyer tax credit example 2: If there was a loss on the sale to an unrelated party, no repayment of the credit is required. Sales subject to these rules include foreclosure or repossession sales, and in figuring gain or loss, basis of residence is reduced by the credit.
Exemption to repayment of homebuyer tax credit example 3: If the home for which a 2008 credit was claimed was destroyed or condemned in 2014 and the purchaser acquires a new home or intends to within 2 years of the destruction or condemnation, the purchaser may continue to repay the credit over the 15 year period.
Exemption to repayment of homebuyer tax credit example 4: If the purchaser got a divorce and transferred their home in 2014 to their ex-spouse, the ex-spouse becomes responsible for repaying the credit over the 15 year period.
Exemption to repayment of homebuyer tax credit example 5: If the purchaser or their spouse is a member of the U.S. uniformed services or Foreign Service, or an employee of the intelligence community, and had to sell their home or stop using it as a principal residence in 2014 because they received orders to serve on qualified extended duty, they do not have to repay any part of the home buyer credit.
Homes purchased after 2008:
The purchaser does not have to repay the credit claimed for a home bought after 2008 if they own and use the home as their principal residence for at least 36 months.
If, before the end of the 36 month period, the purchaser sold the home in 2011 (including a foreclosure or repossession sale), or the purchaser converted the entire home to business or rental use, or the home was destroyed or condemned, the purchaser will have to repay the credit with their 2011 return unless they meet one of the exemptions mentioned above.
Note that if you die, repayment of the credit is not required regardless of the year you purchased your home. If you filed a joint return and then die, your surviving spouse would be required to repay his or her half of the credit.
For more information regarding the First Time Homebuyer Tax Credit, you can visit the IRS website.