Little Known "Interpretations" of the First Time Home Buyers Tax Credit

The IRS gets the final say when it comes to who gets to claim the homebuyer tax credit, who does not, and under what circumstances. 1. When a FTHB buys a 2-4-family home, and occupies one of the units as their personal residence, they are only allowed to claim 10% (or $8000 max) of the unit they OCCUPY--not the entire sales price. Example: If the FTHB bought a duplex for $120,000 and the units are... [more]

The IRS gets the final say when it comes to who gets to claim the homebuyer tax credit, who does not, and under what circumstances. 1. When a FTHB buys a 2-4-family home, and occupies one of the units as their personal residence, they are only allowed to claim 10% (or $8000 max) of the unit they OCCUPY--not the entire sales price. Example: If the FTHB bought a duplex for $120,000 and the units are identical, the "cost basis" is $60,000 and the tax credit they can claim would be $6,000. 2. Income limits are based on ADJUSTED GROSS INCOME. 3. Income CAN Exceed $125,000 (single) and $225,000 (married) by up to $20,000 and FHTB & Long-term Residences can still get a partial tax credit based upon a "MAGI formula" created by the IRS. 4. New Construction - the "date of purchase" is considered the "date" the FTHB OCCUPIES the property--not the closing date or the start-or-construction date. 5. Homes sold on "Land Contract or Contract for Deed" to a FTHB can QUALIFY for a tax credit if they meet 7 tests listed on the FAQs. 6. Tax credit is not available for FTHB in US Territories--only the 50 states. http://www.irs.gov/newsroom/article/0,,id=206291,00.html for further details. [less]