Homebuyer Credit Expanded and Extended (Part 3)

Homebuyer Credit Expanded and Extended (Part 3)

Taxpayers who have not owned another principal residence at any time during the three years prior to the date of purchase are considered first-time homebuyers. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008. In addition, long-time homeowners who buy a replacement home after Nov. 6, 2009 or in early 2010 can also qualify. Under this rule, you must have owned and used the same home as your principal residence for at least five consecutive years of the eight-year period ending on the date you by your new principal residence. For an eligible taxpayer who, for example, bought a home on Nov. 30, 2009, the eight-year period would run from Dec. 1, 2001, through Nov. 30, 2009.

A dependent on someone else’s tax return may claim the first time homebuyer credit if they otherwise qualify. Different rules apply depending upon whether a dependent buys a home after Nov. 6, 2009, or on or before that date. Dependents are not eligible to claim the credit on any purchase after Nov. 6, 2009. However, a dependent who buys a home on or before Nov. 6, 2009 may qualify for the credit.

Minors are generally barred from claiming the credit on home purchases after Nov. 6, 2009. To qualify for the credit, a purchaser must be at least 18 years of age on the date of purchase. For a married couple, only one spouse must meet this age requirement. For purchases on or before Nov. 6, 2009, the tax law does not bar a minor from buying a home and claiming the credit. However, taxpayers who do not otherwise qualify for the credit do not become eligible for the credit simply by using a minor child’s name. In addition, under state law, children under the age of 18 generally are not bound by any contract they sign and cannot be required to comply with the terms of the contract. Thus, it is extremely unlikely that a seller of a home, or a lender if financing is required, would enter into a bona fide sale of a home to a child. Merely using the child’s name to purchase a home does not qualify the child for the credit if, in substance, the child is not a bona fide purchaser of a home.

The credit is available for eligible home purchases after April 8, 2008. You must enter into a binding contract to buy the home before May 1, 2010 and close before July 1, 2010, in order to obtain the credit. For a home you construct, the purchase date is considered to be the date you first occupy the home.

The normal processing time for claiming the credit on an amended return is approximately 8-12 weeks. Recent changes to the tax law have resulted and will continue to result in larger than normal volumes of amended returns. This increased volume has increased our processing time to 12-16 weeks.

If you have a specific question regarding this article, as a public service, and at no cost to you, I invite you to call me with your question. Also at no charge, I am happy provide you with a second opinion on your return that was done by another paid preparer.

Call me and I will be happy to explain my “CPA Quality Tax Preparation at H&R Block Rates”™, my many discounts including the Virtual Tax Office eMail-Order Tax Return Discount of $50 and how you can, in general, minimize your tax preparation fees regardless of who prepares your tax returns. To read previously published tax articles go to www.danghazel.com. You can contact me at info@danghazel.com or call me at 305-451-4224 or 540-825-2771.

Thank you for your interest in reading my tax column. This column is offered as a public service with the understanding that each person's tax situation is different; that you should consult your CPA before taking any action based upon comments made in this article.