Down Payment Assistance Programs: Assistance Generally Not Included in Homebuyer's Income


Is down payment assistance provided under a program sponsored by a tax-exempt organization includable in the homebuyer’s income?

Generally, down payment assistance will not be included in the homebuyer’s gross income for federal income tax purposes.  However, if the buyer receives down payment assistance from a seller-funded program, the homebuyer must reduce the cost basis of the home because the down payment assistance represents a rebate or reduction in the purchase price thus lowering the homebuyer’s cost basis under Internal Revenue Code section 1012.