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First-Time Homebuyer Credit: Scenarios

S1. If a single person (Taxpayer A) qualifies as a first-time homebuyer at the time he/she purchases a home with someone (Taxpayer B) that is not a first-time homebuyer and then later that year they marry each other, is the credit still allowed?

A. Eligibility for the first-time homebuyer credit is determined on the date of purchase. If Taxpayer A, a first-time homebuyer, buys a house and then later that year marries Taxpayer B, not a first-time homebuyer, the credit is allowable to Taxpayer A. Taxpayer A may take the maximum credit.

S2. Taxpayer A is a single first-time home buyer. Taxpayer B (parent) cosigns for A and does not qualify. Both names are on the mortgage. Can Taxpayer A claim the credit and, if so, how much? 

A. Yes. Taxpayer B is not a first-time homebuyer and cannot claim any portion of the credit, but A may claim the entire credit ($7,500 for purchase in 2008; $8,000 for purchase in 2009), if the home was purchased as Taxpayer A's primary residence.

S3. A taxpayer owned her principal residence. Several years ago, she decided to relocate to a rented apartment, but did not sell the former residence. Instead, she rented it out to tenants. Now the taxpayer plans to buy another house and make it her new principal residence. Does she qualify for the first-time homebuyer credit?

A. A taxpayer who owned rental property within the past three years is still eligible for the credit. The taxpayer cannot have owned and used a home as his or her principal residence within the last three years.

S4. If husband and wife wanted to sell the home that the wife owned when they got married, and the husband had not owned a home within the past three years, could he qualify as a first-time homebuyer for the credit even though the wife would not qualify?

A. No. The purchase date determines whether a taxpayer is a first-time homebuyer. Since the wife had ownership interest in a principal residence within the prior three years, neither taxpayer may take the first-time homebuyer credit. Section 36(c)(1) of the Internal Revenue Code requires that the taxpayer and the taxpayer's spouse not have an ownership interest in a principal residence within the prior three years from the date of purchase. The husband may not take the credit even if he filed on a separate return.

S5. Taxpayer purchased a home on April 24, 2008, while she was separated from her husband. Later in the year, they reconciled and were living together at the end of 2008. She has not owned a home since 2004 but he owned one which he sold in 2006. They remained married the entire time. Is the taxpayer eligible for the first-time homebuyer credit?

A. No. The purchase date determines whether a taxpayer is a first-time homebuyer. Since the husband had ownership interest in a principal residence within the prior three years, and the taxpayers were legally married, neither taxpayer may take the first-time homebuyer credit. Section 36(c)(1) requires that the taxpayer and the taxpayer's spouse not have an ownership interest in a principal residence within the prior three years from the date of purchase. While individuals do not have to be married to get the credit, marriage (and legal separation) imputes ownership of a previous home upon the other spouse. The wife may not take the credit even if she filed on a separate return.

S6. I have been estranged from my spouse for over three years and file married filing separately. I don’t know if my spouse has owned a main home in the three-year period, but I did not. If I bought a house in 2009 that otherwise qualifies for the first-time homebuyer credit, can I claim the credit?

A. Section 36(c)(1) requires that the taxpayer and the taxpayer's spouse not have an ownership interest in a principal residence within the three years prior to the date of purchase. While individuals do not have to be married to get the credit, marriage (and legal separation) imputes ownership of a previous home upon the other spouse. If your spouse has not owned a main home in the last three years, then you may claim the credit.

S7. I am separated from my spouse and considered unmarried, and qualify for the unmarried head of household filing status. If I bought a home on May 1, 2009, that otherwise qualifies, can I claim the first-time homebuyer credit? I did not own a main home in the three years before that, though my spouse did.  

A. No. Section 36(c)(1) requires that the taxpayer and the taxpayer's spouse not have an ownership interest in a principal residence within the three years prior to the date of purchase. While individuals do not have to be married to get the credit, marriage (and legal separation) imputes ownership of a previous home upon the other spouse. The taxpayer may not take the credit even if filed on a separate return.

S8. A qualifying taxpayer bought a home in August 2008 that needed a lot of work before occupying. They finished the renovations and moved in the home in January 2009. Can they claim the $8,000, since they did not occupy the home until 2009?

A. No. Taxpayers who purchase an existing home and renovate the property before moving in are eligible for the first-time homebuyer credit based on the date of purchase, not the date of occupancy.    

S9. What are repayment triggers for the first-time homebuyer credit?

A. Generally, if you received the first-time homebuyer credit for a home purchase in 2008, you must repay the credit over 15 years beginning with your 2010 tax return (repayment period). If you received the credit for a home purchase in 2009 or 2010, you do not have to repay the credit if you own and use the home as your main home for 36 months after the date of purchase. There are also exceptions to these general rules when a repayment triggering event occurs during the repayment period for 2008 home purchases or during the 36 month-period following 2009 or 2010 homes purchases.

S10. Taxpayer A sold her home to a related party. Is she required to repay the credit?

A. It doesn’t matter whether Taxpayer A had a gain or a loss on that property.  She is required to repay the entire credit with the tax return for the year that she sold the home, reduced by any amount of the credit that she previously repaid.

S11. Taxpayer A converted her entire home to a business or rental property and no longer uses the home as her main home. Is she required to repay the credit?

A. Taxpayer A is required to repay the entire credit with the tax return for the year she converted the home, reduced by any amount of the credit that she previously repaid.

S12. A single person bought a home, received the FTHBC and then dies. Are repayments waived?

A. Yes. The entire amount of the credit that has not been repaid is forgiven. A Form 5405 should be filed with the person’s final return.

S13. Taxpayer A and B are married. They bought a home together in 2008 and claimed the credit on a joint return. They received the $7,500 credit and repaid $500 each year for 2010, 2011 and 2012. Taxpayer A dies in 2013. Are repayments waived?

A. Taxpayer A’s half of the remaining credit is forgiven, and Taxpayer B now is responsible for only her half of the remaining credit, or $3,000. Now, Taxpayer B is required to repay only $250 a year, beginning with her 2013 tax return.

S14. During their marriage, Taxpayer A and B purchased a home together and claimed the credit. Later they divorced and Taxpayer A transferred the home to Taxpayer B under the divorce decree. Taxpayer A did not keep any interest in the home. Are repayments waived for Taxpayer A?

A. If the home was purchased in 2008, Taxpayer A is no longer required to repay any remaining amount of the credit. Taxpayer B now is responsible to repay the entire remaining amount of the credit in equal annual installments. If they purchased the home in 2009 or 2010, and Taxpayer B sells or stops using the home as her main home the home within 36 months after the purchase date, Taxpayer B must repay the entire amount of the credit if there is gain on the sale of the home.

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Page Last Reviewed or Updated: 17-Dec-2014