How does the 15000 home buyer credit work?

Answer 1

The Actual credit is $8000 (the $15,000 version was never passed).

Here are some of the key IRS Rulings and other answers applicable to the the 200+ questions I received on this credit:

- The Credit can be claimed in this year's tax return by filing an amendment using Form 5405. Qualifying taxpayers who buy a home this year before Dec. 1 can get up to $8,000, or $4,000 for married filing separately.

- The new $8000 credit can be used towards the down payment of a house bought in the credit qualifying period. You need to work with your lender to take advantage of this provision.

- Unfortunately you still have to pay back the existing $7,500 credit (for homes bought between April 8, 2008, and before December 31, 2008). Unlike the $8,000 credit passed recently, the existing credit was not made retroactive. You generally must repay the credit over a 15-year period in 15 equal installments, starting in 2010

- To be eligible for the home buyer credit, your modified adjusted gross income (MAGI) must be less than $95,000 or $170,000 (if married filing jointly) for the relevant tax year. The phase-out of the credit begins when your MAGI exceeds $75,000 or $150,000 (married filing jointly), meaning the amount of credit received decreases after these limits.

- You cannot claim the credit if acquired your home by gift or inheritance OR if you acquired your home from a related person

- If you and your spouse claim the credit on a joint return, each spouse is treated as having been allowed half of the credit for purposes of repaying the credit. So the total amount claimable is still $8000.

- [Recent Update] If you are married joint filers, both partners must meet the first-time home buyer criteria. This is to prevent double dipping, but is biased against married couples since single filers also get the $8000 credit. So if you are planning to get married this year to someone who has owned a home - you may want to buy a home first and get married in 2010.

- If two or more unmarried individuals buy a main home, they can allocate the credit among the individual owners using any reasonable method. The total amount allocated cannot exceed the smaller of $7,500 ($8,000 if you purchased your home in 2009) or 10% of the purchase price. Note: A reasonable method is any method that does not allocate all or a part of the credit to a co-owner who is not eligible to claim that part of the credit (I would go with 50/50 as a reasonable method if one person is not eligible for the credit)

- The purchase date is how you decide which credit you are eligible for. Only homes purchase from Jan 1 2009 to Dec 1 2009 are eligible for the fully refundable $8000 credit. If you constructed your main home, you are treated as having purchased it on the date you first occupied it.