The IRS has spelled out guidelines for eligibility for the home buyer credit when co-borrowers purchase a property.
When a home-owning parent of an adult child co-signs for a mortgage and both names appear on the note, the IRS says that under some circumstances, the first-time home buyer can qualify for the whole amount.
The IRS says the parent doesn’t qualify for any portion of the credit, but if the child hasn’t owned a home during the three years preceding the current purchase and can qualify based on income, he or she can be allocated the entire $8,000 credit.
When unmarried individuals co-purchase a home and only one of them is eligible for the credit, then the full $8,000 can be allocated to the eligible buyer.
Source: Washington Post Writers Group, Kenneth R. Harney (12/04/2009)
The complexity of new home buyer tax credits leaves potential buyers with many questions. Here are answers to some of the most confusing:
Q.1 How does a current home owner qualify for the $6,500 credit?
A. Buyers must have lived in their homes for at least five out of the last eight years. The home they buy must become their primary residence, but buyers don’t have to sell their previous home. They can use the previous home as a rental or a second home and still claim the credit.
Q.2 Does the new home have to be more expensive than the one the buyer currently owns?
A.No. It is fine to use it to downsize. If the property sells for more than $800,000, the buyers don’t qualify.
Q.3 Can buyers who are building a new home claim the credit?
A. Yes, although the contract must be in place by April 30 and the buyer must move in by July 1.
Q.4 Can buyers claim the credit if they purchase a home from a relative?
A. No. The legislation prohibits taxpayers from claiming the credit if the sale is between “related parties,” including parent, grandparent, child, or grandchild.
Source: USA Today, Sandra Block (11/24/2009)