lake norman real estate

New Home Buyer Tax Credit Confusion Addressed by IRS

 

According to a recent update I received from the National Association of Home Builders, two scenarios since the extension of the First-Time Home Buyer tax credit and the creation of the repeat home buyer tax credit have risen and been addressed by the IRS:

“With the addition of the second tax credit, there may now be a situation in which two unmarried buyers purchase a residence together where one qualifies for the $6,500 repeat buyer credit and the other qualifies for the $8,000 credit. According to the IRS, they must allocate the tax credit in a meaningful manner. The repeat buyer cannot receive a tax credit higher than $6,500 and the total amount claimed by both buyers cannot exceed $8,000. For example, the repeat home buyer could claim $6,500 and the first-time home buyer could claim $1,500. Alternatively, both buyers could claim a $4,000 tax credit.

The second scenario involves the qualification status of married purchasers as repeat home buyers. In order to qualify for the repeat buyer tax credit, both individuals must have lived in the same residence for five consecutive years out of the last eight. If one spouse has lived in the house for five years and the other moved in later, after they were married, then they are both excluded from the repeat buyer tax credit.

This information has been updated on NAHB’s consumer tax credit Web site, which can be found at www.federalhousingtaxcredit.com.”

One of my Lake Norman home buyers also raised an interesting question recently.  They have owned a home in Raleigh NC  for 5 years but they only lived in it for 4 years before moving to Lake Norman.  It has been rented for the past year.  Because they had not lived in the home for 5 consecutive years out of the past 8 years they are not eligible for the tax credit.  Remember, there are also income limitations.

When in doubt, I would ask your accountant/CPA!

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2 thoughts on “New Home Buyer Tax Credit Confusion Addressed by IRS

  1. Daniel Longworth says:

    Just happened upon this post while scouring the internet for some kind of classification re: the homebuyer tax credit. In my experience, information indicating exactly who, how and when to claim the highly publicized credit is needlessly confusing, difficult to locate and extremely limited in scope. Yes, the IRS does provide information online, but every professional I dealt with throughout the actual purchase of my home in 2010 had differing opinions on the matter. That continues to this day; my tax preparer now tells me that I must file an amended 2009 return in order to take the credit, although the IRS clearly states that the credit may be claimed on your 2010 return. I believe the IRS dropped the ball on providing appropriate explanations to both real estate and tax professionals.

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