First time home buyer credits

[AccTaxMan]

Let me try to understand this:

Suppose a man and a woman buy a house together in 2009 and it is the first home ever for both of them, they will each get the $8,000 first time home buyer credits in their 2009 single tax return if they do not get married with each other in 2009 (so it will be a total of $16,000 credit for both of them together).

But if they get married with each other before the end of 2009, they will only get one $8,000 credits together in their 2009 joint tax return.

Is it correct?

[BP.]

Let me try to understand this:

Suppose a man and a woman buy a house together in 2009 and it is the first home ever for both of them, they will each get the $8,000 first time home buyer credits in their 2009 single tax return if they do not get married with each other in 2009 (so it will be a total of $16,000 credit for both of them together).

But if they get married with each other before the end of 2009, they will only get one $8,000 credits together in their 2009 joint tax return.

Is it correct?

See instructions for Form 5405:

http://www.irs.gov/pub/irs-pdf/f5405.pdf

Total credit available is $8,000, allocable however the parties choose. They don't each qualify for $8,000.

[AccTaxMan]

See instructions for Form 5405:

http://www.irs.gov/pub/irs-pdf/f5405.pdf

Total credit available is $8,000, allocable however the parties choose. They don't each qualify for $8,000.

Thank you.

$8,000 for each party sounds too good to be true anyway. It makes sense that they have to divide the credit.

[WhiteOleander]

How in the world will this be tracked by the IRS? If the two people are unrelated, how will the IRS know they bought the house with someone else? There is no reporting from the title companies when someone buys a house. Only on the seller when they sell.

So, each person can go to a preparer and say they bought the house. They can not tell the preparer the truth of buying with a partner. Each person would get 8,000. The IRS has no way to track this do they?

Congress writes these laws so fast and don't stop to think about the fine print and what can and will happen.

[David1980]

On the top of Form 5405 you have to enter the address and purchase date of the home bought. When two different taxpayers each claim $8,000 and have the same address and date purchased it might raise a flag.

[Larmil]

How in the world will this be tracked by the IRS? If the two people are unrelated, how will the IRS know they bought the house with someone else? There is no reporting from the title companies when someone buys a house. Only on the seller when they sell.

So, each person can go to a preparer and say they bought the house. They can not tell the preparer the truth of buying with a partner. Each person would get 8,000. The IRS has no way to track this do they?

Congress writes these laws so fast and don't stop to think about the fine print and what can and will happen.

Congress don't think (PERIOD)

[WhiteOleander]

On the top of Form 5405 you have to enter the address and purchase date of the home bought. When two different taxpayers each claim $8,000 and have the same address and date purchased it might raise a flag.

Thanks. I haven't had one of these credits in my office yet. I should have looked at the form.

[BOB W]

Thanks. I haven't had one of these credits in my office yet. I should have looked at the form.

Hummm..... are you saying that a 2 family house won't get the credit for each family??? OR that writing an "A" on one and a "B" on the other in the address would still get you caught???

[David1980]

Same question could be raised with two families at the same residence both claiming HOH. Has that been audited? Certainly. Was it allowed? I believe??

I think in the case of a duplex it would certainly raise audit risk but with separate closing statements and separate titles it would be easily resolved.

Time will tell just how tough the audits on the FTHBC are. An $8,000 refundable credit is going to have pretty high abuse/fraud IMO.

[BP.]

So, each person can go to a preparer and say they bought the house. They can not tell the preparer the truth of buying with a partner.

Request the buyer's closing documents and settlement statement to verify ownership.

[JohnH]

I still maintain the First Time Homebuyers Credit is a potential time bomb. It's deceptively simple on the surface but has great potential to cause multiple problems for the preparer way out of proportion to the fee one can charge to prepare it.

[FEDUKE404]

Homeowner time bomb

I still maintain the First Time Homebuyers Credit is a potential time bomb. It's deceptively simple on the surface but has great potential to cause multiple problems for the preparer way out of proportion to the fee one can charge to prepare it.

I agree completely, especially in its prior (you gotta repay it!) format. Now that a client can claim some 2009 home purchase expenses on an amended 2008 return, things can potentially get really nasty.

BTW: Wanna take a shot at this?: North Carolina does not have "sales tax" on purchased automobiles, but instead a "highway use fee" which I have found, from prior experience, does not fit neatly into the addition to sales tax tables category. My guess is the same verbiage might impact the potential auto purchase rebates now in place.

Oh yes: The NC fee is for "the privilege" of driving on NC roads!!

Try explaining that to your local clients!!

FE

[JohnH]

Yep, I had that conversation yesterday. Client asked if the "Highway Use Tax" would qualify as sales tax on a new car. I told him I don't have a clue - let's talk about it next year when it matters and hopefully there's been some guidance from on high.

He didn't care for my answer, so I piled on - I added that if he's planning to buy a car just so he can get the sales tax deduction, then that's a question I can answer right now right now. It would be a REALLY stupid thing to do.

[FEDUKE404]

NC auto sales tax probably ISN'T

Yep, I had that conversation yesterday. Client asked if the "Highway Use Tax" would qualify as sales tax on a new car. I told him I don't have a clue - let's talk about it next year when it matters and hopefully there's been some guidance from on high. He didn't care for my answer, so I piled on - I added that if he's planning to buy a car just so he can get the sales tax deduction, then I can answer that question right now. It would be a REALLY stupid thing to do.

Sometimes the truth rears its ugly head.........

A couple of years ago I had a client who could have used the "extra" sales tax on Schedule A. Client had bought a brand new high end SUV. Everything I was able to find out at the time said it was not sales tax, so we had to let it go.

I expect the same still applies, unfortunately.

FE

[Burke]

It's a tax if it is based on valuation. It's a fee if it is a flat amount. No matter what they call it.