November 26, 2009

Closer Look at First Time Home Buyers' Credit

Under the recent 2009 American Recovery and Reinvestment Act (ARRA), all taxpayers who buy a house for the first time before December 1st are eligible for up to $8,000 in tax credits that they can claim when they file their 2008 tax returns. But as with any legislation, you have to read the fine print. If you wish to claim your tax credit, you should be aware of the details.

Firstly, if you have inherited a house from someone like a relative who has passed away, you are not eligible to the tax credit even though you may never have bought a house before.

Secondly, neither you nor your spouse must have owned a house for the past 3 years.

Thirdly, this tax credit is not available to you if you are a single tax filer who earns more than $95,000 per year even if you fulfill the 3 year requirement of not having owned a house. And if you and your spouse file your taxes jointly and your adjusted gross income exceeds $170,000 per year then you are also ineligible for the first time home buyers' tax credit.

Fourthly, if you buy a house for the first time but from a person defined as 'related' to you, you are not eligible to claim this tax credit. A 'related' person includes a spouse, parents, grandparents and own children. Linked to that is buying a house from a company or business that you own at least 51% of. That also disqualifies you from claiming the tax credit.

Fifthly, if you use a state-sponsored bond program to buy a house, you are not eligible to participate in this scheme. Some state-sponsored bond programs offer you assistance to pay for the down payment on a house or give you mortgages at competitive rates. These programs are funded by taxpayers' money so the IRS deems you to have already received a benefit from taxpayers' funds and therefore you should not claim another $8,000 tax credit for first time home purchases that also come from the same source.

Everyone who has made claims for this tax credit has been scrutinized by the IRS for proper eligibility. In a recent case, the IRS has nabbed an accountant in Florida who submitted fraudulent first time home buyers' tax credit claims on behalf of 15 of his clients, most of whom said they did not understand the intricacies of the program and they trusted him to file their claims truthfully and accurately for them. The guilty tax preparer was sentenced to 3 years in jail. His clients will certainly be getting an audit letter from the IRS.

Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for over a decade. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.