Tax News

CCH (cch.taxgroup.com) reports:

  Individuals cannot claim the first-time homebuyer tax credit until the purchase of their home is final, the IRS announced on April 10. The Service has posted updated questions and answers (Q&A) about the credit on its website.

$8,000 for 2009

  Congress created the first-time homebuyer credit in 2008 (P.L. 110-289) and enhanced it in 2009 (P.L. 111-5). The credit is 10 percent of the purchase price of the home (with a maximum credit of $7,500 for 2008 and $8,000 for 2009. (IR-2009-27; TAXDAY, 2009/03/19, I.1). The credit is temporary and expires December 1, 2009. Additionally, the credit phases out for individuals with modified adjusted gross income (AGI) between $75,000 and $95,000 and for married couples filing jointly with modified AGI between $150,000 and $170,000.

Timing

  Eligibility for the first-time homebuyer credit is determined on the date of purchase, the IRS advised on its website. Individuals cannot claim the credit in anticipation of a qualified home purchase.

Repayment

  One of the most important differences between the 2008 first-time homebuyer credit and the 2009 credit is the repayment requirement for 2008, Lynn Schmidt, EA, Winter Haven, Fla., told CCH. "The 2008 credit must be repaid in equal installments over 15 years."

  The 2009 credit, in contrast, has a limited repayment requirement. An individual must repay the 2009 credit if the home ceases to be his or her principal residence within 36 months from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being the individual's principal residence, the IRS advised on its website.

Scenarios

  The IRS also posted some scenarios about the first-time homebuyer credit on its website. The examples describe who may claim the credit and when the taxpayers are ineligible for the credit.

  By George L. Yaksick, Jr., CCH News Staff

First-Time Homebuyer Credit Questions and Answers

First-Time Homebuyer Credit: Scenarios