Westchester Home Buyers Tax Credit
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Posted on | December 8, 2009 | No Comments
Basic Qualifications and Conditions
Q. What are the basic eligibility requirements for a first-time home buyer?
To qualify as a first-time home buyer, you cannot have owned a home that was your principal residence in the three years prior to closing.
Q. What are the basic eligibility requirements for repeat buyers?
To qualify as a “step up” or repeat buyer, you must have owned a home that you lived in as your personal residence for five consecutive years out of the previous eight years prior to closing.
Q. I bought a home once before, so I’m not a first-time home buyer. Can I still get the credit?
A. For the first time home buyer credit, you qualify as a first-time home buyer so long as you have not owned a primary residence in the past three years prior to closing on your new property. If you owned a home before, you can still qualify as a “step up buyer” or “repeat buyer” under the program if you lived in that home that you owned for five consecutive years out of the previous eight years prior to closing.
Q. Does my condo/coop/multi-family/etc. qualify?
A. Yes, the legislation takes a very broad view of a qualifying home. Condos and cooperative apartments qualify. So do multi-families, houseboats, or mobile homes and trailers that do not have motors.
Q. Can I get the credit if I buy a multi-family home, and rent out the units I am not using as my principal residence?
If you otherwise would qualify for the credit, you can get the credit even if you are renting out part of the property, so long as you use part of the property as your principal residence. However, the purchase price of the home will be allocated proportionately among the units, so it might be that you would not get the full credit is the proportional value of your principal residence is less than $80,000 for first-time home buyers, or $65,000 for repeat buyers– since the credit is 10% of the value.
Q. What if I owned a vacation home in the past three years?
Owning a vacation home, or an investment property, does not disqualify you for the first-time home buyer tax credit if you did not use that property as your primary residence.
Q. Can I get the repeat buyer credit if I otherwise qualify, even if I don’t sell my previous home?
Yes, the law does not require that you sell the home that you lived in for five consecutive years out of the last eight years. You can keep title to it. However, you have to make the qualifying home your principal residence, so you can’t live in the prior home.
Q. Does it matter how expensive the home is?
The only restriction is that the home cannot cost more than $800,000, which is unlikely for purchasers at the income levels that have been set.
Q. How long do I have to live there?
You lose a piece of the credit if you sell or you move out of your home before three years. But you shouldn’t be buying if you’re planning on moving again in less than three years anyway.
Q. Can I get the credit if I buy the home from a relative?
No, the government is trying to prevent “sham transactions” in which one relative “sells” a home to another to generate the credit. Purchases from your spouse, brothers, sisters, parents, grandparents, your children, your grandchildren, and your spouse’s family members (brothers, sisters, etc.) do not qualify.
Q. If I am a repeat buyer who otherwise qualifies, do I have to buy a more expensive house to qualify as a “step up” or “repeat” buyer to get the tax credit?
No. The term “step up” is a term of art, but does not mean that you literally have to buy a more expensive house than the one that you were in for five consecutive years out of the last eight.
Q. Can I still get the credit if I am building a new construction house?
You can get the credit for new construction. If you are building the house yourself, the date of “purchase” for purposes of the tax credit is the day you occupy your new home, which means you have to move in by June 30, 2010. If a builder is building the house for you, the date of “purchase” will be the date of closing with the builder, which again must be by June 30, 2009.
Q. What if I qualify for the credit, but my spouse does not qualify because she previously owned a home?
Unfortunately, for a married couple to claim the credit, both spouses must qualify. So if you are a married couple and one of you does not qualify for the tax credit, neither of you can claim it. This can come up because one of your does not qualify as a first-time home buyer, or one of you does not qualify as a repeat buyer. This rule applies even if you file separately.
Q. What if I qualify for the credit, but my girlfriend does not qualify, and we are buying the property together.
If you are an unmarried couple, you can allocate the credit to the partner who has not owned a home, and who otherwise qualifies for the tax credit. So you can get the entire credit, so long as you allocate the credit to yourself.
Q. Can I get the credit if I buy a home outside the United States?
No, only homes in the United States qualify.
Q. Can I get the first-time home buyer credit if I owned a home outside the United States within the past three years?
No, you would not qualify as a first-time home buyer if you owned a home anywhere.
Income Qualifications
Q. What income level qualifies me for the tax credit?
The government has only made the tax credit available for people with incomes below certain thresholds: up to $125,000 for single filers and $225,000 for joint filers. It’s the same for both first-timers and repeat buyers. If you make more than that, then the credit will phase out.
Q. What is my “modified adjusted gross income” or MAGI, which is the basis for the income restrictions?
The IRS defines MAGI as your “Adjusted Gross Income” (or AGI) plus certain amounts of foreign owned income (which most people don’t have). Your AGI is simply your total income for the year (wages, salaries, interest income, dividends, and capital gains) minus certain adjustments and deductions, but before the itemized deductions on Schedule A of your tax return and your personal exemptions. You can find your AGI on Form 1040 and 1040A as the last number on page 1 and the first number on page 2, or on the Form-EZ as line 4.
Q. What if my income is in that range between $125,000 and $145,000 where I get a partial credit? How is the partial credit figured?
Essentially, you get a proportionate amount of the credit for the proportionate amount of income you have in that $20,000 range. For example, if your MAGI is $135,000 as a single filer, that means you’re $10,000 into that $20,000 range, which is 50% of the range, so you’d get 50% of the tax credit – or $4,000 (for first-time home buyers) or $3,250 (for repeat buyers).
Deadline Issues
Q. What are the deadlines for buying a home that would qualify for the credit?
You have to close on your qualifying purchase by June 30, 2010, and you have to be in contract on that purchase by April 30, 2010.
Q. Can I get the credit if I entered into a contract before the new tax credit was enacted on November 6, 2009, but I haven’t closed yet?
Yes, the law does not require that you go into contract after the effective date. So long as you close after the date the law goes into effect, and before June 30, 2010, and you otherwise qualify, you’ll get the tax credit.
Q. I closed on my home prior to November 6th, 2009, and was not eligible for the tax credit at the time, but I qualify under the new income guidelines. Can I claim the credit?
Unfortunately, no. The new income restrictions only apply to closings after November 6, 2009.
Tax Issues
Q. Can I still get the mortgage tax deduction if I take the credit?
Yes . The tax credit does not affect your eligibility for the home interest mortgage deduction.
Q. How is a tax credit different from the home interest mortgage deduction that all homeowners get?
A tax deduction is a great thing, but a tax credit is even better. A tax credit is a dollar-for-dollar reduction in the amount of tax you have to pay the government. So if on your return you would owe the IRS $20,000 in income taxes, and you qualify for the full $8,000 tax credit, you would get to reduce your taxable burden from $20,000 to $8,000. In contrast, a tax deduction reduces your taxable income, not your taxes owed. So if you paid $30,000 in mortgage interest in the tax year, and your income was $100,000, your income would be reduced by $30,000 to $70,000. That’s very good, because it means that you don’t have to pay taxes on that $30,000 – your taxable income goes from $100,000 to $70,000. Depending on your applicable tax rate, that could save you thousands of dollars in taxes owed, but it’s not the same dollar-for-dollar reduction as in a tax credit.
Q. Can I apply my 2010 closing purchase to my taxes for 2009 that I’ll file by April 2010?
Yes, if your 2010 purchase qualifies for the tax credit, you can claim the credit on your 2009 return, either on your return by April 15, 2010 or on amended return filed after that date. Call your accountant.
Q. Can I apply my 2009 closing purchase to my taxes for 2008 that I filed in April 2010?
Yes, if your 2009 purchase qualifies for the tax credit, you can claim the credit on your 2008 return by filing an amended tax return. Call your accountant.
Q. How do I claim the tax credit on my federal income tax return?
You should probably talk to your accountant about this. But if you are looking for the form you use for the credit, it is IRS Form 5405 to determine the tax credit amount, and then line 67 on your 1040 income tax return for your 2009 return. You do not need to get preapproval from the IRS to claim the credit, but you should absolutely consult with your accountant before you claim the credit to make sure you qualify.
Q. Do I get the credit to my state taxes also?
No, the tax credit we are talking about applies only to your federal return.
Q. Can I still get the credit if I don’t owe any federal income taxes?
If you are entitled to a tax credit for your home purchase, you will get the credit whether you owe federal income taxes for the tax year or not. If, for example, you are entitled to the full $8,000 tax credit for first-time home buyers, and you owe only $1,000 in federal taxes for 2009, then you’ll get a $7,000 check from the IRS.
Q. If I am getting an FHA loan, can I get an advance on my tax credit to help pay my closing costs.
Yes, HUD is allowing home buyers who are getting FHA-insured loans to “monetize” their expected tax credit by using the money to cover some closing costs. Check with your lender as to whether you qualify, or whether your lender is allowing for this.
Q. I’m not doing an FHA loan, but I’d like to get some of my tax credit money in advance. How do I do that?
If you want to get some of your credit early, you can adjust your income tax withholding on your W-4 form or your estimated quarterly payments. Also, the IRS allows you to claim the credit toward your 2009 return for the 2008 calendar year if you close by December 31, 2009, if you would have qualified in 2008 under the income guidelines, and you can file an amended tax return to get your credit earlier.
Congress has acknowledged the unique circumstances affecting members of the military, the foreign service and the intelligence community by making the following exceptions that apply to both the $8,000 tax credit for first-time home buyers and the $6,500 tax credit for repeat home buyers.
Military Issues
Q. Are there exceptions to some of these rules for military personnel.
Yes, both with the deadlines, and the payback rules. You must be a “Qualified service member,” meaning a member of the uniformed services of the U.S military, a member of the Foreign Service of the U.S., or an employee of the intelligence community. And you must be on “Official extended duty,” meaning any period of extended duty while serving at least 50 miles away from home for a period in excess of 90 days.
Q. If I am a member of the military, and I am deployed within three years after closing on my qualifying purchase, do I have to pay the credit back?
No, the IRS created an exception for qualified service members who sell or move from a qualifying home within three years due to official extended duty. You don’t need to pay the credit back.
Q. What are the deadlines for qualified service members on official extended duty?
The deadlines of April 30, 2010 for contract and June 30, 2010 for closing have been extended for one full year for qualified service members on a period of official extended duty.
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• re: Home Buyer Tax Credit Updated FAQ
Posted by wanda grinder on Sunday December 6, 2009 9:22 AM
Here are details on the extension and expansion of the U.S. tax credit for homebuyers signed into law on November 6, 2009 by President Obama:
Deadline Extended Into 2010
The tax credit was originally to end November 30, 2009. It has now been extended into 2010. If you have a signed purchase agreement by April 30, and close the transaction before July 1, you’re eligible for the credit.
Most Other Buyers Now Eligible
First-time homebuyers are eligible for a credit of 10 percent of the price of the home, up to $8,000. (Married couples filing individually can receive $4,000 each.) You are considered a first-time buyer if you haven’t owned a principal home in the U.S. in the last three years.
The tax credit has also been expanded to buyers who have owned a home at some period during the last three years and used it as their principal residence for five consecutive years in the last eight. They can receive up to $6,500 – or $3,250 for couples filing as individuals.
No Repayment if You Stay in Home for Three Years
The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount of the credit will be recouped on the sale.
Caps on Income, Home Price
Individuals who earn up to $125,000, and couples who earn up to $225,000, are eligible for the full credit. Individuals who earn between $125,000 and $145,000 – and couples who earn between $225,000 and $245,000 – can receive a percentage of the full credit.
The maximum purchase price is $800,000. Any home selling for more than that makes the buyer ineligible for the credit.
Taking Advantage of the Credit
You can claim the credit on your 2009 or 2010 tax return. There are also programs in place to enable you to use the funds to help with the down payment.
Applying the Credit to Your 2009 Taxes
You will need to do three things to claim the credit on your 2009 tax return:
Fill out the applicable IRS form to determine the amount of your available credit.
Apply the credit when you file your 2009 tax return or an amended return.
Attach documentation of purchase to your return or amended return.
If You Purchase in 2010
Buyers purchasing in 2010 will have the option to:
Claim the credit on their 2009 return, even if the purchase is completed after December 31, 2009.
File an amended return for 2009 if their purchase is completed after April 15, 2010.
Claim the credit on their 2010 tax return.
Tags: tax credit extended > westchester tax credit for buyers > yonkers home tax credit for buyers
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