Decoder: First-time homebuyer
First-time homebuyers are entitled to an $8,000 tax credit this year, but how do you qualify? It's not as easy as you may think. Marketplace's Rico Gagliano explains who qualifies in our latest Marketplace Decoder.
Prospective home buyers Lars Kalnajs and Leah Fuchs talk to real estate broker John Skrabec of Live Urban Real Estate in the yard of a home that has been reduced in price in Denver, Colo. (Chris Hondros/Getty Images)
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Tess Vigeland: All these various rescue plans will often mention a certain class of homebuyer -- first-timers. Last year, they got a $7,500 tax credit that they eventually have to pay back. Though the latest stimulus give them an $8,000 one that they don't have to pay back. But what exactly is a "first-time homebuyer"? It's actually not as easy as it sounds. Rico Gagliano is here with some answers in the latest installment of The Marketplace Decoder.
Rico Gagliano: First the bad news: as defined by these new tax credit laws, a "first time home buyer" is not simply someone buying a home for the first time. Because, you know, that'd be too easy. The good news: the definition is the same whether you're claiming last year's 7,500 buck tax credit, or the new one for eight grand.
Amanda Weier: A first-time home buyer is defined as a person who has not purchased and occupied a home within the previous three years.
That's Amanda Weier -- she's a real estate agent here in L.A. And you heard her right. If you bought a home, say, four years ago, then sold it and rented an apartment for the last three years -- blam! You're a first-time buyer again. And there's more good news. You can be considered a first-time buyer even if you currently own a home. You just can't have lived in it.
Weier: If you own a vacation home, or a rental home, which you have not resided in, you can still qualify for this credit.
Pretty sweet, right? But before you get too excited, there are a few catches. First, the home you're buying has to be your principal residence. Second, you can't be rich.
Weier: The credit is for people whose adjusted income is $75,000 and lower. If you're over $95,000, you're not going to qualify for it at all.
If your adjusted income falls somewhere between those numbers, you enter the wonderful world of IRS formulas, by which you might get some -- but not the entire -- credit. Of course, if you're married, the income limit doubles. But speaking of marriage, that's catch No. three.
Weier: If two people are married and one person owned a residence the previous three years, you do not qualify.
That's right: if you're a first-time home-buyer, but your spouse isn't, you can't get the credit for a new home. So, add that to the list of things you'll have to work through in your relationship.
Now, if you want to purchase a home with someone you're not married to, that's a different story. If both of you are first-time buyers, you split the tax credit. If only you are, you get the whole shebang. One possible moral of the story: marry someone who doesn't have a home, or buy a place with a friend who does.
In Los Angeles, I'm Rico Gagliano for Marketplace Money.
Comments
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From Pacifica, CA, 10/06/2009
Marc Dykeman "My wife's father is co-signing our home loan. He would not qualify for the first-time homebuyer tax credit. Can we still claim the credit?"
ans: "...unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter." (http://www.federalhousingtaxcredit.com/2009/faq.php)
From El Paso, TX, 08/19/2009
Purchased house in Jul. 2004, separated in Nov. 2007, divorced in May 2008. Spouse kept house, do I qualify?
From chico, CA, 07/23/2009
We purchased our home in 2008; filed our federal income taxes requesting the stimulus (haven't heard anything yet). We are hoping the IRS will make the 2008 stimulus retro-activebecause of what they've done for 2009. I think the best chance for that is for all qualified 2008 first time homebuyers to send email or call their senators & congresspeople asking that it be made retro-active. I am going to do it.
From Durham, NC, 07/01/2009
No question, just a gripe. I bought a home again last summer after divorce, bankruptcy, financial rebuilding, 2 years of financial and strategic planning. In a down market with a lot of stuff on the market, I made a good choice, made a down payment, and thought I made good. Nope. I qualify for the tax year 2008 credit, and have to pay it back. Someone who buys this year gets $500 more, and doesn't have to pay it back. Is this just? Or just bribery for people who weren't planning to buy to jump in while the water's cold? Oops, that's a question. My bad.... Color me miffed that I don't get "free money" because I bought 6 months too early. :P
From West Chester, PA, 03/31/2009
My wife and I purchased our first home on Nov 1, 2008. We did not live in it until this past weekend because it was a fixer upper. We were renting until this past week. Since we didn't live in the house until March 2009, does this mean we qualify for the $8,000 credit?
From brooklyn, NY, 03/15/2009
Someone help me...
I was willed 25% of my deceased father's home upon his death, where I have been living for ten years. I did not purchase this house, but am on the deed along with my mother and sister.
I am looking to buy my first house. Am I considered a "fist time home buyer"
From AR, 03/11/2009
My sister just bought a home, and she'll definitely qualify for the $8K. She's going to plow it into her equity. I wish I could buy a home, too- but the crash ate my downpayment savings. Should have just stashed it in the bank.
From Ann Arbor, MI, 03/09/2009
My fiance and I should qualify for the first-time homebuyer tax credit. From a tax standpoint-how could our marital status affect us? Are we wised to purchase a home as two single people? or a married couple?
From Chestertown, MD, 03/08/2009
My wife's father is co-signing our home loan. He would not qualify for the first-time homebuyer tax credit. Can we still claim the credit?
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