Q. Can homebuyers claim the tax credit in advance of purchasing a property?
A. No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.
Q. I bought my home in early 2009 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?
A. You can file an amended return so that you may take advantage of the $8,000 credit that does not have to be repaid.
Q. Can a taxpayer claim a credit if the property is purchased from a seller with seller financing and the seller retains title to the property?
A. Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed. According to the IRS, factors that would demonstrate the ownership of the property would include: 1) Right of possession 2) Right to obtain legal title upon full payment of the purchase price 3) Right to construct improvements 4) Obligation to pay property taxes 5) Risk of loss 6) Responsibility to insure the property 7) Duty to maintain the property.
Q. If a taxpayer purchases a mobile home (manufactured home) with land and qualifies for the credit, is the amount of the credit based on the combined cost of the home and land?
A. Yes. The first-time homebuyer credit is ten percent of the purchase price of a principal residence. The total purchase price (mobile home and land) is used to determine the amount of the first-time homebuyer credit.
Q. Is a taxpayer who purchases a mobile home and places the home on leased land eligible for the first-time homebuyer credit?
A. Yes. A mobile home may qualify as a principal residence and it is not necessary that the taxpayer own the land to qualify for the first-time homebuyer credit.
Q. Can a taxpayer who purchases a travel trailer qualify for the credit?
A. Yes. A travel trailer that is affixed to land may qualify as a principal residence.
Q. Can an individual who has lived in an RV qualify for the credit?
A. No. For purposes of the first-time homebuyer credit, an RV with a built-in motor is personal property that is not affixed to land and does not qualify as a principal residence. However, someone who has owned and lived in an RV within the past three years may still qualify as a first-time homebuyer when purchasing a non-RV residence.
Q. Can I apply for the credit if I bought a vacation home or rental property?
A. No. Vacation homes and rental property do not qualify for this credit.
Q. For existing homeowners, must the new house cost more than the old house?
A. No. For example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6,500 credit.
Q. If a parent (who will not live in the property) co-signs for a mortgage, will their child still be eligible for the credit?
A. Yes, provided that the child meets the other requirements for the tax credit.
Q. Are there other restrictions?
A. Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:
• The buyer purchases the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. Purchasing from a step-relative is allowed as long as the person is not a direct blood relative.
• The buyer is a nonresident alien.
• The buyer’s home financing comes from tax-exempt mortgage revenue bonds (purchased prior to 2009).
For more information contact your Bella Casa Real Estate Professional:
Bella Casa Real Estate Group
207 NE 19th Street, Suite 100
McMinnville OR 97128
buy. sell. be happy.