What are the qualifications for the First-Time Homebuyer Credit?
My daughter purchased her deceased grandfathers house in February 2009. Her 2 uncles, her father and an aunt had joint ownership of the property. The house was purchased at full market value and purchased with the guidance of a real estate agency. We have been told that the amendment on August 2009 stipulating that you cannot purchase a home from a relative, deems my daughter ineligible to qualify for the First Time Home Buyers Tax Credit. Are there any clauses stating that because the house was purchased prior to the implementation of the new admendment that they would still qualify for the tax credit? Or are there any clauses at all that would help them get around this amendment? She is heartbroken to find out after almost a year that now she does not qualify and can now not afford the much needed addition this extra $ would afford them. Any help on this matter will be greatly appreciated. Thank you very much
Homebuyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the First-Time Homebuyer Credit. The credit:
• Applies only to homes used as a taxpayer's principal residence.
• Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.
• Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.
In general, you can claim the credit if you are a first-time homebuyer or a long-time resident of the same main home. You are considered a first-time homebuyer if you meet all of the following requirements.
1. You purchased your main home located in the United States:
a. After December 31, 2008, and before May 1, 2010, or
b. After April 30, 2010, and before July 1, 2010, and you entered into a binding contract before May 1, 2010, to purchase the property before July 1, 2010.
2. You (and your spouse if married) did not own any other main home during the 3-year period ending on the date of purchase.
3. You do not meet any of the 10 conditions listed on page two of the IRS document Instructions for Form 5405.
Keep in mind that the tax credit is not free money. The first-time homebuyer credit is similar to a 15-year interest-free loan. Normally, it is repaid in 15 equal annual installments beginning with the second tax year after the year the credit is claimed. The repayment amount is included as an additional tax on the taxpayer's income tax return for that year.
As you mentioned, the credit does not apply when inheriting a property or when purchasing a property from a relative. A "relative" is defined as "Members of a family, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc.) and lineal descendants (children, grandchildren, etc.)."
Her father was a joint owner of the property. Therefore, because she purchased the property from an ancestor who had an interest in the property she is ineligible for the First-Time Homebuyer Credit.
For the benefit of readers who may be earlier in time in a similar circumstance, if there is a parent who has an ownership interest of a property, they should consider executing a quitclaim deed to a nonlineal ancestor of the buyer. By doing so, the buyer can purchase the property and receive the First-Time Homebuyer Credit, assuming all of the other requirements are met.
I hope this information helps you Find. Learn & Save.