When the homebuyer tax credit was tweaked last November, a purchase price limit was added to the law. Now you can only claim the credit for up to 10 percent of the property's purchase price as long as the house sold for $800,000 or less. Hence, the $8,000 maximum credit. But if your home costs $800,001, then you're out of luck. And yes, the pricetag limit applies to first-time and move-up buyers and to all homes, not just those purchased after the credit was extended last November.
No. 5: Calculating ownership time We bought a home in 2000, and sold it in 2007 to relocate for work. Now we're relocating again. We lived in the first home for five consecutive years out of the last eight, but have only lived in our current home for a little over two years. To qualify for the move-up credit, do we have to have lived in our current home for five years or just have lived in any residence for five consecutive years?
You should be able to claim the homebuyer tax credit if you meet all the other requirements. The IRS says that eligible taxpayers must show that they owned and lived in a home, not necessarily your current home, as a primary residence for a five-consecutive-year period that falls somewhere within the eight-year time frame that ends on the date the home on which the credit is claimed is purchased.
In your case, let's say you buy another home March 31, 2010. The eight-year period before that purchase is from April 1, 2002, through March 31, 2010. During that time, you owned and used the same home as your principal residence for five consecutive years, from April 1, 2002, through March 31, 2007.
Note that the year periods considered by the IRS are not the calendar year, but the actual year of residing in a home and purchasing another.
A couple of other things to note here:
- You don't have to own a home at the time you make your new property purchase.
- Neither do you have to sell if you do own a home and are living in it. In this case, however, you will have to move to the new house so that it becomes your main home to qualify for the homebuyer tax credit.
Essentially, you only have to meet the criteria of having owned and lived in a home as your primary residence for five straight years within the eight years before you buy the house you'll claim toward the credit.
Because you say "we," let me note that for married taxpayers, the law looks at the homeownership history of the homebuyer and spouse. Husband and wife must qualify as longtime residents, with each living in the same home for at least five years of the eight pre-new-house-purchase years.
One other tax thing: When you do move to your new home, if this latest relocation is job-related, don't forget to also claim your moving expenses.
And a final note to all taxpayers who claim the first-time or move-up homebuyer tax credit. You won't be able to e-file your return. Because of new requirements to ensure credit claims are legitimate, you must send paper copies of home-purchase documents with your Form 1040 to show you do indeed qualify.
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