2008-2009 house buyers (新买屋者)

The IRS has now issued an updated Form 5405 which rules on a number of questions raised around the 2009 ($8000) and 2008 ($7500) home buyer tax credits. Here are some of the key rulings and facts based on the 200+ questions I received on this credit:

- The Credit can be claimed in this year's tax return by filing an amendment using Form 5405.

- Unfortunately you still have to pay back the existing $7,500 credit (for homes bought between April 8, 2008, and before December 31, 2008). Unlike the $8,000 credit passed recently, the existing credit was not made retroactive. You generally must repay the credit over a 15-year period in 15 equal installments, starting in 2010

- To be eligible for the home buyer credit, your modified adjusted gross income (MAGI) must be less than $95,000 or $170,000 (if married filing jointly) for the relevant tax year. The phase-out of the credit begins when your MAGI exceeds $75,000 or $150,000 (married filing jointly), meaning the amount of credit recieved decreases after these limits.

- You cannot claim the credit if acquired your home by gift or inheritance OR if you acquired your home from a related person (I stand corrected on a comment I made on this)

- If you and your spouse claim the credit on a joint return, each spouse is treated as having been allowed half of the credit for purposes of repaying the credit.

- If two or more unmarried individuals buy a main home, they can allocate the credit among the individual owners using any reasonable method. The total amount allocated cannot exceed the smaller of $7,500 ($8,000 if you purchased your home in 2009) or 10% of the purchase price. Note: A reasonable method is any method that does not allocate all or a part of the credit to a co-owner who is not eligible to claim that part of the credit (I would go with 50/50 as a reasonable method if one person is not eligible for the credit)

- The purchase date is how you decided which credit you are eligible for. If you constructed your main home, you are treated as having purchased it on the date you first occupied it.