Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has provided initial guidance for claiming the new Code Sec. 36 first time home buyer tax credit. The credit was added by the Housing and Economic Recovery Act of 2008 (P.L. 110-289). The credit is only available for a U.S. home purchased after April 8, 2008, and before July 1, 2009. Vacation homes and rental property are not eligible for the credit. For newly built homes, the purchase date is the first date the taxpayer lives in the home. Only taxpayers who are first-time home buyers or those who have not owned a home in the three years prior to the relevant purchase qualify for the credit.

  The credit equals 10 percent of the purchase price of the home with a maximum available credit of: (1) $7,500 for either a single taxpayer or a married couple filing jointly; or, (2) $3,750 for a married person filing a separate return. Unlike most tax credits, this credit operates like an interest free loan and generally must be paid back over 15 years in equal annual installments. Repayment begins the second tax year after the year the credit is claimed and is included as an additional tax on the taxpayer's income tax return. Taxpayers may need to adjust their withholding or make quarterly estimated tax payments to meet the repayment requirements. Certain events (e.g., sale of the home) can cause the repayment amount to change or accelerate the due date.

  The credit is phased out for a married couple filing a joint return whose adjusted gross income plus various amounts excluded from income is $150,000 to $170,000. For other taxpayers, the phase out range is $75,000 to $95,000. The following individuals are not eligible for the credit: individuals who buy their home from a close relative; taxpayers who stop using the home as their main home (special rules apply for an involuntary conversion); individuals who sell the home before the end of the year; non-resident aliens; taxpayers who are or were eligible for the District of Columbia first-time home buyer credit for any taxable year; and individuals who obtain home financing from tax-exempt mortgage revenue bonds. The credit will be claimed on the soon to be released new form, IRS Form 5405. This form, along with further instructions, will be available later in 2008 on the IRS website at www.irs.gov.

IR-2008-106,
2008FED ¶46,569

Other References:

 
Code Sec. 36

  CCH Reference - 2008FED ¶4190.01

  Tax Research Consultant

  CCH Reference - TRC INDIV: 57,950