First Time Homebuyer Tax Credit & Short Sale
- The fact that the property was sold as a short sale, deed in lieu of foreclosure, or REO is irrelevant to the first time homebuyer tax credit.
- Buyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the first time homebuyer credit.
If I purchase a property sold as a short sale, am I still eligible for the first time homebuyer tax credit?
Will a purchase of short sale affect the buyer credit?
You question is devoid of facts so I will surmise you meant to ask, "If I purchase a property that was sold as a short sale, am I still eligible for the first time homebuyer tax credit?" The answer to your question is, "yes." The fact that the property was sold as a short sale, deed in lieu of foreclosure, or REO is irrelevant to the first time homebuyer tax credit.
First-Time Homebuyer Tax Credit
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 early versions of the tax credit were 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.
The law that went into effect Nov. 6, 2009 does not require a repayment of the credit.
I hope this information helps you Find. Learn & Save.
Best,
Bill