5 questions about the homebuyer tax credit

No. 3: Co-signer concerns

q_v2.gif I co-signed a house loan for my parents. I don't live in the house. My fiancé and I are planning to buy our first home after we're married this year. Will my name on my parents' mortgage prevent us from getting the tax benefit for first-time buyers?

a_v2.gif What a good daughter! And in this case, the IRS thinks so, too.

In order to qualify for the first-time homebuyer tax credit, the law requires that you not have owned or lived in the property within the three years before buying another home. While as mortgage co-signer you do have an ownership interest in your folks' house, it is not your principal residence. So you and your future husband should be fine with claiming the credit when you buy your first home as newlyweds.

Essentially, by co-signing your parents' mortgage but not living in the house with them, their home is a real estate investment for you. The situation is similar to that of a homeowner who rents a property. In that case, the landlord would qualify for the first-time homebuyer tax credit when he buys a place to make his primary residence.

No. 4: Caps, caps, everywhere caps

q_v2.gif The income eligibility was increased to $225,000 for couples. Is this amount for first-time buyers and move-up buyers? Is this income cap based on adjusted gross income or just gross income? There also is a cap on the house price eligible for the credit. Is it for first-time buyers and move-up buyers? Was there a house price cap before?

a_v2.gif I love people who are interested enough in tax breaks that they pay close attention to the particulars!

First the income limits: If you bought your home under the previous first-time buyer rules, that is the law in place for home purchases between Jan. 1, 2009, and Nov. 30, 2009, you must make no more than $75,000 if you're a single taxpayer or $150,000 if you're married and filing jointly. The homebuyer tax credit in these cases is eliminated if you make $95,000 or more as a single filer or $170,000 or more as joint filers. If you make between the two income limits for your filing status, your credit amount will be reduced.

For home purchases after Nov. 6, 2009, when the homebuyer tax credit was expanded and extended, the income limit is $125,000 for single taxpayers and $225,000 for married couples who file a joint return. If you make more than that, your credit amount will be reduced. And if you make more than $145,000 as a single homebuyer or $245,000 and are married, you'll get no credit.


The income that is considered in determining your credit eligibility and amount is what is known as modified adjusted gross income, or MAGI. This is your adjusted gross income (the amount that is entered on the last line of page 1 of Form 1040 and 1040A) plus some tax breaks that you claimed (in this case, foreign earnings) added back into the mix.

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