Obscure Facts about the Home Buyer Tax Credit

I certainly learned a few things reading this fascinating article.  Thought you might also benefit from it.  Especially if you are considering purchasing a multifamily residence...

From:  www.brokeragentsocial.com

Published on Tuesday, November 17, 2009, 8:41 AM Last Update: 2 day(s) ago by Karen Deis

Category: All Articles » Economy and Politics » Housing Sector

The IRS gets the final say when it comes to who gets to claim the homebuyer tax credit, who does not, and under what circumstances.

They have made a feeble attempt to update some of the FAQs posted on their websitehttp://www.irs.gov/newsroom/article/0,,id=206291,00.html but if it's anything like the last extension, it will take them a while to update their FAQ page. 

However, there are some little-known "interpretations" that most loan officers, real estate agents and even tax advisors dont know about. 

1. When a FTHB buys a 2-4-family home, and occupies one of the units as their personal residence, they are only allowed to claim 10% (or $8000 max) of the unit they OCCUPY--not the entire sales price.  Example:  If the FTHB bought a duplex for $120,000 and the units are identical, the "cost basis" is $60,000 and the tax credit they can claim would be $6,000.

2. Income limits are based on ADJUSTED GROSS INCOME.

3.  Income CAN Exceed $125,000 (single) and $225,000 (married) by up to $20,000 and FHTB & Long-term Residences can still get a partial tax credit based upon a "MAGI formula" created by the IRS.

4. New Construction - the "date of purchase" is considered the "date" the FTHB OCCUPIES the property--not the closing date or the start-or-construction date.

5. Homes sold on "Land Contract or Contract for Deed" to a FTHB can QUALIFY for a tax credit if they meet 7 tests listed on the FAQs.

6. Tax credit is not available for FTHB in US Territories--only the 50 states.