First Time Homebuyer's credit

[arabianne]

What is the name of your state (only U.S. law)? Washington

I've been searching the IRS.gov website for information on this topic, and wanted to clarify if I'm reading it right.

My partner and I want to buy a house. He has owned a house in the last three years, so he would not qualify as a first time homebuyer under the restrictions. I, however, have not. I fit all of the qualifications as a first time homebuyer under the IRS's guidelines as I read them, I have the requisite down payment, and my debt to income ratio is good. The kicker is that I have the lower credit score, so in order to qualify for a really good loan, we would most likely need to do something that would take his income/credit score into consideration. Our thoughts were to do something like have me primary on the loan but list him as a co-signer. We've been working with a mortgage broker who stated that she could secure such a loan for us with those terms, but could not advise us on the tax implications.

It would seem that I should be able to take the tax credit, as I am primary on the loan. I found this guidance (verbatim) on the IRS's instructions for the first time homebuyer credit form:

LINE 1: 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.

By this definition of the rules, can I read this to mean that I can allocate all of the credit to myself rather than my partner, since to allocate part to him would be giving credit to someone who is not eligible? It does say "ANY reasonable method". Who determines what is 'reasonable' to the IRS? Is that a rhetorical question?

What sort of tax advice should we seek before pursuing a mortgage under these conditions? Whatever we do, we want to make sure all of our ducks are in a row and we've done things the right way. Can anyone shed some light?

[LdiJ]

Originally Posted by arabianne

What is the name of your state (only U.S. law)? Washington

I've been searching the IRS.gov website for information on this topic, and wanted to clarify if I'm reading it right.

My partner and I want to buy a house. He has owned a house in the last three years, so he would not qualify as a first time homebuyer under the restrictions. I, however, have not. I fit all of the qualifications as a first time homebuyer under the IRS's guidelines as I read them, I have the requisite down payment, and my debt to income ratio is good. The kicker is that I have the lower credit score, so in order to qualify for a really good loan, we would most likely need to do something that would take his income/credit score into consideration. Our thoughts were to do something like have me primary on the loan but list him as a co-signer. We've been working with a mortgage broker who stated that she could secure such a loan for us with those terms, but could not advise us on the tax implications.

It would seem that I should be able to take the tax credit, as I am primary on the loan. I found this guidance (verbatim) on the IRS's instructions for the first time homebuyer credit form:



By this definition of the rules, can I read this to mean that I can allocate all of the credit to myself rather than my partner, since to allocate part to him would be giving credit to someone who is not eligible? It does say "ANY reasonable method". Who determines what is 'reasonable' to the IRS? Is that a rhetorical question?

What sort of tax advice should we seek before pursuing a mortgage under these conditions? Whatever we do, we want to make sure all of our ducks are in a row and we've done things the right way. Can anyone shed some light?

Our office agrees with your interpretation of the law. You may take the entire credit.

[tranquility]

I agree as well, but note there is not a lot of guidance out there for either the credit or the last year loan on which is is based.

[arabianne]

Thank you very much. We began a prequalification for a home loan today.

[taxgirl09]

You need to file an extention on your taxes and then you will be allowed to claim the credit and get paid within approx 21 days from my experience this season. I have filed hundreds of returns and several homebuyers credit. The kicker is you must purchase or plan to purchase this year to claim the credit. So go ahead and file the extention and await the purchase price. If you wait until after April 15th and did not file extention, the IRS will only accept it through paper and good luck getting it within 3months if that happens. Efile is the way to go for good turnaround.

This is very unusual tax season, returns are way down at the IRS. If you want to be ahead of the madness, get the extention so you have the right to efile post season.

Liberty Tax Service