Give a round of applause to Michael Agetstein, chair of the tax department for the Maryland accounting firm, KatzAbosch. He has tackled some difficult questions from our readers on the homebuyer credit.
Here are his answers:
Q. Lived in previous house from 1998 thru 2007. Did deed n lieu in 2007 and Chapter 7. We did in fact have 5 consecutive years in the property. Can we qualify for the $6500 tax? We closed on our new house in Feb. 2010.
A. The first-time homebuyer credit provisions of the tax law were amended by the Worker, Homeownership, and Business Assistance Act of 2009 to allow an exception to the "first time homebuyer" definition for "long-time residents of same principal residence." The amendment, which is effective for residences purchased after 11-6-2009 and before 5-1-2010, allows upwards of a $6,500 tax credit for people who have "owned and used the same residence as their principal residence for any 5 consecutive year period during the 8 year period ending on the date of the purchase of a subsequent principal residence...". The law does not specify any further exception to this rule for individuals who have filed Chapter 7. Therefore, as long as your prior house was your principal residence for at least 5 consecutive years during the 8 year period ending on February 2010 (the date you purchased the new home) you should qualify for a credit. The amount of the credit will be determined by the purchase price of the new residence and potential limitations based on your income. Also, keep in mind, if you gave up the ownership of your old residence before February 2007, you may qualify for the larger first- time homebuyer credit as you would have had no present ownership interest in that residence for the 3-year period ending on the date you purchased the new residence.
Q. I am going through a divorce and have never owned a home. My soon to be ex does, but I was never on the title. When does my divorce need to be finalized and at what point of purchasing the home? Offer, signing etc.?
A. If you were married, the fact that your spouse owns a home would automatically disqualify you from claiming the credit even if you filed separately. However, if your divorce is finalized (not just legally separated) before you actually close on the purchase of a new residence, you should be able to qualify for the credit. You must enter into a binding contract to purchase the home before 5/1/2010 and close before 7/1/2010. The credit cannot be claimed until the date you actually close.
Q. I'm trying to get all my paperwork together for filing my taxes. I qualify for the $8,000 credit. When I looked for the copy of the settlement statement I could not find it in my paperwork so I had to call the title company for a copy. I notice in the article you say the IRS is requiring that the form be signed by all parties, but according to my title company in California this is not a requirement, she said she could put the title companies stamp on it. Will this be good enough for the IRS?
A. According to the IRS website, the IRS recognizes that requirements for settlement documents will vary from jurisdiction to jurisdiction and may not reflect signatures of both buyer and seller even though the instructions to Form 5405 indicate the settlement sheet should show signatures of all parties. Therefore, the IRS has clarified that it will accept a settlement statement if it is complete and valid according to local law. In jurisdictions not requiring signatures on the settlement document, the IRS encourages the buyer to sign the settlement statement prior to attaching it to the tax return even if the signature of the seller is not on the document.
Q. Hi, my sister and I are about to buy our first home together, both of us will be on the mortgage and title. If I am the one who claims the $8,000 on my 2009 tax return, and then for any reason move to another state before the 3 years period — but my sister (co-owner) will still be using the house as her primary resident — do I need to pay back the $8,000? How about if only one of us uses the house as a primary resident, can we still claim the $8,000?
A. IRS Notice 2009-12 allows taxpayers who are not married to allocate the new homebuyer credit using any reasonable method. If you and your sister buy a new home together and you otherwise qualify for the credit, nothing prohibits the two of you from agreeing that you would be the one taking the full credit. However, if within 36 months of the date of purchase, the property is no longer used as your personal residence, you are required to repay the credit even though your sister may still maintain the house as her primary residence. In other words, the 36 month rule applies to the person claiming the credit. If you think you may be moving before the expiration of the 36 month period, you may want to reconsider how you are allocating the credit.
Q. I am a co-borrower on my parents' house. They are on the title. I lived with them until I bought a new house in Feb. 2009. My wife and I are on the title and the mortgage is under our names. My parents have now rented out their house and live with us. While I lived with my parents, I made most of the payments, and thus deducted the mortgage interest and property taxes. My question: Would I be eligible for the first time homeowner's credit? I have never "owned" a house. Not sure what the true definition of Home Ownership is.
A. As you were not an owner of your parents' house, but merely a co-signer on the mortgage, assuming you meet all the other qualifications for the credit you should qualify as a first time homebuyer on your new residence.
Q. My husband and I file taxes together. He is a resident and I only have the ITIN number. Except for that, I think we qualify for the first-time homebuyer's credit. You think there will be a problem? A.The answer to this question is not so clear. Generally, nonresident aliens do not qualify for the credit. Therefore, on it's face it would seem that your husband, as a resident alien, would be entitled to the credit but you would not. However, as the law provides that with respect to the filing of a joint return, half of the credit is treated as having been allowed to each individual filing the return it is not clear to me as to whether your being a nonresident alien disqualifies both of you from taking the credit on a joint return. It appears possible that your husband may be able to claim the credit (limited to one half the full credit) on a married filing separate return but I have not found anything that verifies this. Q. My ex-husband and I bought our house 9 years ago (no problem with the 8 year restriction), I continue to live in the house (meeting the 5 year consecutive principal residence restriction). Both our names are on the title but the divorce decree gives it to me. I'm closing on a new house March 11 (within' the timeline). Only my name will be on the paperwork for the new house. I remarried 12/10/09. My new husband is a UK citizen here on a visitor's visa (he is not a resident, has no tax payer ID, no SS number, etc). I assume he doesn't qualify for anything but does the fact that we're married prevent me from getting the $6,500 credit (not sure how foreigners' status factor into the equation)? A. See answer above. It is unclear as to whether on a joint return 1/2 of the credit may be allowed or if the one spouse being a nonresident alien disqualifies the entire credit on a joint return (though I believe the latter may be the case). I also have not been able to verify whether filing a MFS return for the qualifying spouse will allow for the taking of 1/2 the credit assuming she otherwise qualifies.
assuming you meet all the other qualifications for the credit you should qualify as a first time homebuyer on your new residence.
Q. My husband and I file taxes together. He is a resident and I only have the ITIN number. Except for that, I think we qualify for the first-time homebuyer's credit. You think there will be a problem?
A. The answer to this question is not so clear. Generally, nonresident aliens do not qualify for the credit. Therefore, on it's face it would seem that your husband, as a resident alien, would be entitled to the credit but you would not.
However, as the law provides that with respect to the filing of a joint return, half of the credit is treated as having been allowed to each individual filing the return it is not clear to me as to whether your being a nonresident alien disqualifies both of you from taking the credit on a joint return. It appears possible that your husband may be able to claim the credit (limited to one half the full credit) on a married filing separate return but I have not found anything that verifies this.
Q. My ex-husband and I bought our house 9 years ago (no problem with the 8 year restriction), I continue to live in the house (meeting the 5 year consecutive principal residence restriction). Both our names are on the title but the divorce decree gives it to me.
I'm closing on a new house March 11 (within' the timeline). Only my name will be on the paperwork for the new house. I remarried 12/10/09. My new husband is a UK citizen here on a visitor's visa (he is not a resident, has no tax payer ID, no SS number, etc). I assume he doesn't qualify for anything but does the fact that we're married prevent me from getting the $6,500 credit (not sure how foreigners' status factor into the equation)?
A. See answer above. It is unclear as to whether on a joint return 1/2 of the credit may be allowed or if the one spouse being a nonresident alien disqualifies the entire credit on a joint return (though I believe the latter may be the case).
I also have not been able to verify whether filing a MFS return for the qualifying spouse will allow for the taking of 1/2 the credit assuming she otherwise qualifies.