Do you qualify for the $8000 Tax Credit for First Time Home Buyers?

Post written by Steve Otto. Follow me on Twitter.

We just recently refinanced our house and when my wife posted that as her status on Facebook it created quite a buzz. Quite a few people asked if we took advantage of the $8000 tax credit. There seems to be several interpretations as to who qualifies for the $8000 tax credit and a few theories on how to beat the system.

Here are some answers to a few common FAQs concerning the Tax Credit, taken from FederalHousingTaxCredit.com

1. Who is eligible to claim the tax credit?
First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.

2. What is the definition of a first-time home buyer?
The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

3. How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

4. Are there any income limits for claiming the tax credit?
Yes. The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

The biggest area of confusion seems to be with defining ownership within the past three years. Don’t confuse owning a home with purchasing a home. If you purchased your home 10 years ago, but have lived in it (and owned it) for the past ten years, then you were a homeowner for the past three years.

Another area of confusion is if the current home is in only one of the spouses names. Bottom line – it doesn’t matter. Even if the husband and wife file separate returns, it doesn’t matter. As explained here ,if you are married and one or both of you owned a home within the past three years – you do not qualify as a first time home buyer.

Disclaimer: I am not an attorney, Realtor, financial adviser, or mortgage expert. But I am pretty good at researching information on Google. Ubervice and Steve Otto are not responsible for any decisions you make based on this information. You should always consult an appropriate professional for more accurate information and guidance.

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