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.
There are some little-known interpretations that most loan officers, real estate agents and even tax advisors don’t know about.
The IRS have made a feeble attempt to update some of the First Time Home Buyer FAQs posted on their website but if it’s anything like the last extension, it will take them a while to do a full update.
In the meantime here are some important facts:
- When a First Time Home Buyer 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.
- Income limits are based on ADJUSTED GROSS INCOME.
- 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 (modified adjusted gross income) formula” created by the IRS
- 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.