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.
- You purchased your main home located in the United States:
- After December 31, 2008, and before May 1, 2010, or
- 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.
- You (and your spouse if married) did not own any other main home during the 3-year period ending on the date of purchase.
- You do not meet any of the 10 conditions listed on page two of the IRS document Instructions for Form 5405 (PDF).
Keep in mind this 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.
First-Time Home Buyer Tax Credit and You
If I understand your message correctly, your spouse purchased a home for her parents. It was your spouse’s parent’s main home and not your spouse’s main home. The rule is that you do not qualify if “You (and your spouse if married) did not own any other main home during the 3-year period ending on the date of purchase.” If the house was not her main home, your spouse qualifies for the First Time Home Buyer Tax Credit.
Let us say for the sake of argument that the property was your spouse’s main home at that time. Notice the time limitation regarding the rule. If your spouse considered that property her main home, at some point in 2007 it stopped being her main home. Therefore, on the three-year anniversary or her quitting the home in 2007, that is the date she becomes qualified for First Time Home Buyer Tax Credit.
I hope this information helps you Find. Learn & Save.