Posted by Hugh Nations Signing Agents of Austin on 7/29/10 9:52am
Msg #346775

Quick question

Anyone know how the federal home purchase credit is treated for income tax purposes? Is it simple income?

On second thought, of course someone knows the answer. People on this forum know everything. Sometimes they even know things that are unknowable. Especially on Just Politics.

Reply by jba/fl on 7/29/10 9:54am
Msg #346776

I knew the answer until the last statement. Now, I forgot. Of course, if you are speaking for yourself.....

Reply by jba/fl on 7/29/10 10:00am
Msg #346778

Google is your friend - really.

My search: "how the federal home purchase credit is treated for income tax purposes"

gave me:

http://www.federalhousingtaxcredit.com/faq1.php

wherein all questions are asked and answered. #'s 10, 12, & 17

Reply by Hugh Nations Signing Agents of Austin on 7/29/10 10:15am
Msg #346787

Re: Google is your friend - really.

Okay, now I feel stupid. Of course it's a tax credit, so it isn't going to be treated as any kind of income. After I remove my head from it's current dark and restricted location, I think I'll go douse my head in cold water and have a second cup of coffee.

The daughter just got her $8,000 check, and I was focused on that.

Thanks, Julie. And please don't chortle quite so loudly.

Reply by MW/VA on 7/29/10 9:57am
Msg #346777

Try IRS.gov. It's the IRS that knows everything--LOL!

Reply by PAW on 7/29/10 10:03am
Msg #346779

For tax purposes, the 'credit' is treated just like any other loan. That is, it is not considered income since it has to be paid back.

The following excerpt is from "Mortgage News" concerning the new housing bill ...

"The bill grants a tax credit of up to $7,500 to new homeowners. Eligible recipients are those who have not owned a primary residence for three years (although they may own a vacation property or a time share). The tax credit represents an amount up to 10 percent of the purchase price and couples in commuting marriages can each purchase a home although they have to share the credit.

"But the credit is not a gift from the government. It is actually a loan and must be repaid in 15 years, starting the second year after the home purchase. Granted it is an interest free loan but if the home is sold in less than 15 years the balance must be repaid immediately except in the case of the death of the homeowner or with some exceptions for divorce or other emergency situations.

"The main downside to this provision is that it will require filing a tax return regardless of the status of the homeowner. The credit is added to any refund due the taxpayer and loan payments are deducted from refunds or added to the tax obligation. The credit and the obligation to file a refund to collect and repay it could affect seniors living on fixed incomes and Social Security and may require using a professional tax preparation service. Taxpayers who neglect repaying the "loan" will be subject to all of the usual IRS penalties for non-filing and non-payment."

(Source: http://www.mortgagenewsdaily.com/812008_Housing_Bill_Tax_Implications.asp)

Reply by PAW on 7/29/10 10:10am
Msg #346782

Forgot to add, that the pay back only applies to the 2008 purchases. In 2009, the rules changed such that the credit is not paid back.

See IRS Bulletin http://www.irs.gov/newsroom/article/0,,id=206293,00.html

Reply by MichiganAl on 7/29/10 10:07am
Msg #346780

How do you cook a London broil? Um, you broil it?

How is the federal home purchase credit treated for income tax purposes? Um, as a credit?

Reply by Linda_H/FL on 7/29/10 10:12am
Msg #346783

Apparently not Al..read Paul's response.

I was surprised...I had no idea it's considered a loan...

Reply by PAW on 7/29/10 10:14am
Msg #346786

Re: Apparently not Al..read Paul's response.

Read my reply to my post. (Darn enter key causes multiple post on the same subject!) Basically, in 2008 it was a loan, but in 2009 to present, it does not have to be paid back. It is a credit applied to the taxpayers tax liability.

Reply by Linda_H/FL on 7/29/10 10:28am
Msg #346791

It wasn't even available in 2008....

Oooohhh..I'm so confused!!

Reply by MichiganAl on 7/29/10 8:01pm
Msg #346898

It's OK Linda

If there's one thing we notary signing agents are good at, it's over-thinking things.

Reply by PAW on 7/29/10 10:12am
Msg #346784

Short answer - it's not income, it's a credit ...

Credits are not deducted from income like deductions. It is simply a credit applied to the taxpayers tax liability.

Reply by Larry/IL on 7/29/10 10:53am
Msg #346794

Everyone, Plan Carefully!

Anybody that took the 2008 First Time Home Buyers Credit will have to start repaying in when they file their 2010 taxes. They will have to add $500 to their income, for the next 15 years. Just think if this moves one into the next tax bracket or triggers AMT. Has the potential to cost way more in taxes than the credit was worth. Shame on the government for calling it a credit that was in reality a loan that had to be paid back. ONLY the 2008 so called credit has to be repaid, not the 2009.

In 2012 employers will be required to disclose the value of the benefits they provide for each employee's health insurance coverage on the employee's annual Form W-2. The set of forms going out in 2012 will reflect coverage provided in 2011. Any amounts above the limits for respective filing status will be added to the employees income and taxed. In my opinion this should not affect most low and middle income filers. it will how ever trip some up. By the time the $500 home buyers credit repay and these added insurance costs are added to the income, there will be a lot of filers that trigger the AMT. You will find you personally know some of these people that will pay dearly. I know it will affect quite a few of my family and friends. Here in Chicago, it will affect more than half of all the people I have closed loans for, seeing the income on their 1003.

Additionally, when congress lets the Bush Tax cuts expire the marriage penalty kicks back in as do many other tax cuts many of us see, i.e Child Tax Credit will be reduced. It has been estimated that married couples that makes $100k will pay an additional $3,200 in taxes each year. A married couple with two children will pay an estimated $4,000 more a year in taxes.

Everyone should start taking a good look at their tax liabilities and possible deductions way before tax season rolls around! I will start doing mock tax filings around September. Some may find it beneficial to defer or cut back on their income. I sometimes do not take appointments around the holidays starting days or weeks earlier or later than normal. I also rise my fees hoping they turn me down, if they don't it pays for the extra tax liability. Here's a tip I hope you all are using, keep track of your miles for trips to the bank to deposit your checks, Kinkos, Fed Ex/ UPS drop boxes.

CIRCLE THE WAGONS, PULL THE SHADES!

Reply by Ilene C. Seidel on 7/29/10 10:57am
Msg #346796

If credit is claimed in 2008 you recapture over 15 yrs. It's not income it's offset off schedule A.
If 2009 there's no recapture. Husband's tax law professor this is his answer.

Reply by Linda_H/FL on 7/29/10 11:10am
Msg #346799

Okay..I stand corrected...really didn't realize it was

available in 2008...thought it started in 2009.....

Sorry...and very interesting replies..thanks!!

Reply by taxpro on 7/29/10 12:01pm
Msg #346805

If you are talking about the First Time Home Buyers credit, or the Long-time Homeowner credit, it is not taxable income.