First Time Home Buyer's Credit for J1, F1, H1B visa taxes

[Visa Taxes Expert]

First Time Home Buyer's Credit for J1, F1, H1B visa taxes

This article addresses the recently-passed First Time Home Buyer's Credit.

In an attempt to recover from the recent problems in the home-building section of the economy, Congress passed the Housing and Economic Recovery Act of 2008 that gave a $7,500 “credit” to U.S. Residents who purchased their first home in 2008. The credit was not REALLY a credit, however, but actually an interest-free loan that would be repaid over 15 years ($500 per year). It required that the buyer buy the home between 8 April 2008 and 1 July 2009 and that they own and live in the home for at least 36 months from date of purchase.

While the credit was well received by the American public, it became obvious that it was NOT having the desire effect. For this reason, Congress modified the credit in the American Recovery and Reinvestment Act of 2009. In this law, the credit was increased to $8,000, and, unlike the previous law, it was a TRUE credit with no payback provisions for purchases made in 2009. The old $7,500 “credit” (with the 15-year payback requirement) still applied for purchases made in 2008.

Under the new law, the credit applied to any purchase of a home in 2009 before 1 December 2009. The home must be used as the buyer principal residence. The $8,000 credit reduces the taxes of the buyer. If the buyer's tax liability is LESS than $8,000, the credit is fully refundable, meaning that the extra credit above the tax liability is added to the buyer's refund.

The $8,000 does NOT have to be repaid if the buyer owns and occupies the house for at least THREE years from date of purchase. Further, if the house is purchased in 2009 prior to 1 July 2009, the buyer can amend their 2008 tax return and request the $8,000 credit in that amendment. If the house purchased on or after 1 July 2009, but before 1 December 2009, the credit can be requested on the 2009 tax return.

As with any tax law, there are requirements to meet. To qualify:
· your income cannot exceed $95,000 if you are single or $170,000 if you are married.
· You cannot be eligible to claim the District of Columbia's First Time home buyer credit for 2008 or any prior year.
· The home's financing cannot come from tax-exempt mortgage revenue bonds.
· The home MUST be located inside one of the fifty states in the U.S.
· The home cannot be inherited or received as a gift.
· You cannot buy the home from a related person who is your spouse, ancestor (parent, grand-parent, great-grandparent, etc.) or lineal descendant (children, grandchildren, etc. Note, however, that you CAN purchase the house from a sibling or from an aunt, uncle or cousin.
· You cannot buy the home from a corporation or partnership in which you have a controlling interest.
· Finally, you must be a citizen or resident alien of the U.S.


That last provision is the one that is most pertinent to our clientele. If you are a non-resident or dual-status alien, you do NOT qualify for this credit. However, if you file jointly with your spouse and you both CHOOSE to be treated as resident aliens for all of 2009, you DO meet the criteria to claim this credit, just as long as you buy the house before 1 December 2009.

Given the current housing market, many persons in the U.S. on H-1, H-1B and L-1 visas will be tempted to take advantage of this situation to buy a home at discounted prices, with very favorable interest rates, in order to claim the $8,000 credit. However, you must carefully consider exactly to what you are committing yourself and what consequences you will face if you cannot meet all of the requirements.

The biggest consideration is the requirement that you must live in the house for three years from date of purchase! Jobs under the H-1 and L-1 visas, by their very nature, tend to be temporary. While it is true that many jobs last up to six years and beyond, just as many jobs will end after six months, often with little or no notice. You may be required to re-locate to another city or state within the United States, or even be required to return to your home country. If this happens, and you must sell the house within 1-to-2 years of purchase, it is likely you will NOT recover the costs you incurred when you originally purchased the house. These costs typically run between 3-to-4 percent of the cost of the house. Further, you will have to pay costs to SELL the house, which can run up to 10% of the house's sales price. Finally, because you did not own the house for at least 36 months after purchase, you will be legally obligated to return the $8,000 credit you received. While there are exceptions that allow this repayment to be forgiven, a job change or employer-mandated move is NOT one of those exceptions!

For these reasons, you must carefully consider all aspects of your home-buying decision before you go forward with your purchase.

If you have any questions, please Contact Us or Post your questions in the Forum.

[nilu]

Originally Posted by Visa Taxes Expert

First Time Home Buyer's Credit for J1, F1, H1B visa taxes

This article addresses the recently-passed First Time Home Buyer's Credit.

In an attempt to recover from the recent problems in the home-building section of the economy, Congress passed the Housing and Economic Recovery Act of 2008 that gave a $7,500 “credit” to U.S. Residents who purchased their first home in 2008. The credit was not REALLY a credit, however, but actually an interest-free loan that would be repaid over 15 years ($500 per year). It required that the buyer buy the home between 8 April 2008 and 1 July 2009 and that they own and live in the home for at least 36 months from date of purchase.

While the credit was well received by the American public, it became obvious that it was NOT having the desire effect. For this reason, Congress modified the credit in the American Recovery and Reinvestment Act of 2009. In this law, the credit was increased to $8,000, and, unlike the previous law, it was a TRUE credit with no payback provisions for purchases made in 2009. The old $7,500 “credit” (with the 15-year payback requirement) still applied for purchases made in 2008.

Under the new law, the credit applied to any purchase of a home in 2009 before 1 December 2009. The home must be used as the buyer principal residence. The $8,000 credit reduces the taxes of the buyer. If the buyer's tax liability is LESS than $8,000, the credit is fully refundable, meaning that the extra credit above the tax liability is added to the buyer's refund.

The $8,000 does NOT have to be repaid if the buyer owns and occupies the house for at least THREE years from date of purchase. Further, if the house is purchased in 2009 prior to 1 July 2009, the buyer can amend their 2008 tax return and request the $8,000 credit in that amendment. If the house purchased on or after 1 July 2009, but before 1 December 2009, the credit can be requested on the 2009 tax return.

As with any tax law, there are requirements to meet. To qualify:
· your income cannot exceed $95,000 if you are single or $170,000 if you are married.
· You cannot be eligible to claim the District of Columbia's First Time home buyer credit for 2008 or any prior year.
· The home's financing cannot come from tax-exempt mortgage revenue bonds.
· The home MUST be located inside one of the fifty states in the U.S.
· The home cannot be inherited or received as a gift.
· You cannot buy the home from a related person who is your spouse, ancestor (parent, grand-parent, great-grandparent, etc.) or lineal descendant (children, grandchildren, etc. Note, however, that you CAN purchase the house from a sibling or from an aunt, uncle or cousin.
· You cannot buy the home from a corporation or partnership in which you have a controlling interest.
· Finally, you must be a citizen or resident alien of the U.S.


That last provision is the one that is most pertinent to our clientele. If you are a non-resident or dual-status alien, you do NOT qualify for this credit. However, if you file jointly with your spouse and you both CHOOSE to be treated as resident aliens for all of 2009, you DO meet the criteria to claim this credit, just as long as you buy the house before 1 December 2009.

Given the current housing market, many persons in the U.S. on H-1, H-1B and L-1 visas will be tempted to take advantage of this situation to buy a home at discounted prices, with very favorable interest rates, in order to claim the $8,000 credit. However, you must carefully consider exactly to what you are committing yourself and what consequences you will face if you cannot meet all of the requirements.

The biggest consideration is the requirement that you must live in the house for three years from date of purchase! Jobs under the H-1 and L-1 visas, by their very nature, tend to be temporary. While it is true that many jobs last up to six years and beyond, just as many jobs will end after six months, often with little or no notice. You may be required to re-locate to another city or state within the United States, or even be required to return to your home country. If this happens, and you must sell the house within 1-to-2 years of purchase, it is likely you will NOT recover the costs you incurred when you originally purchased the house. These costs typically run between 3-to-4 percent of the cost of the house. Further, you will have to pay costs to SELL the house, which can run up to 10% of the house's sales price. Finally, because you did not own the house for at least 36 months after purchase, you will be legally obligated to return the $8,000 credit you received. While there are exceptions that allow this repayment to be forgiven, a job change or employer-mandated move is NOT one of those exceptions!

For these reasons, you must carefully consider all aspects of your home-buying decision before you go forward with your purchase.

If you have any questions, please Contact Us or Post your questions in the Forum.

Hi,

I am a first time home buyer closing in November. I am on H1-visa with I-140 approved and now in my 9th year of extended of H1 visa . Do I qualify for the first time home buyer credit of $8K.

Pls. help.

thanks and regards,
Nilu

[Atlanta Tax Guru]

Yes, you DO qualify for the $8,000 First Time Home Buyer's Credit as long as you closed on your house before 1 December 2009.

You can amend your 2008 return to claim the credit, but the processing of such amendments are taking so long (due to the great chance of fraud) that I am recommending that most clients should simply wait until January 2010, then claim the credit on their 2009 return.

[nilu]

Hi,

Thanks for your reply. Forgot to update the fact in my previous email that I have my 140 approved but 485 is not applied yet (waiting for the date to be current on my H1). You still think that I qualify for the 8K credit.

Pls. let em know.

thanks and regards,
Nilu

[Atlanta Tax Guru]

As long as your H-1 is approved on or before 1 December 2009, you will be able to file jointly with your spouse and you both CHOOSE to be treated as resident aliens for 2009.

You may have to wait until sometime in June 2010 to file, but you will qualify for the credit.

[RD93]

Follow up question. Here is my similar scenario :

Hi,

I am on H1 visa from 2003. Currently waiting to apply for 485 (140 approved). Was in USA for all of 2009. Bought a home and closed in Nov. 2009 (first time home buyer for primary residence).

Due to loan requiring a SSN, I bought the home and closed in Nov-2009. Then I added my wife to the title/grant-deed in Jan 2010.

Q1. Do I qualify for the first time home buyer tax credit ?
Q2. My wife is not working (no income)...so the net income limit applicable would be for single or married in this case (since I closed the home as married-but-sole-owner and then changed to married-community-both-owner)

thx,
RD

[Atlanta Tax Guru]

Already answered; see other post.

[coconut]

I'm dual status in 2009. I hold F-1 before 10/1/09 and hold H1b after 10/01/09. And I'm single. I want to buy a house before 4/30/10. Do I qualify for the first time home buyer tax credit ?

Thanks

[Atlanta Tax Guru]

Unfortunately, you do NOT qualify for the $8,000 First Time Home Buyer's Credit. Below is the answer I received from the IRS via email when I posed this question.

You have asked us about your client's eligibility for the first time homebuyers credit. The issue of a dual-status taxpayer has been addressed by the Treasury Department, after consultation with the Joint Committee on Taxation. They made it clear that the credit may not be claimed unless an alien made the election under Internal Revenue Code section 6013(g) to be a resident alien. Since your client was a single, unmarried taxpayer in 2009, he may not claim the credit. The intent of the law was that if a taxpayer is a nonresident alien for any part of the year, he or she is disqualified.

That guidance is VERY clear! Sorry.

[coconut]

Thank you for your answer. My question is I buy the house at 2010 and also I'm the full year resident at 2010, can't I claim the credit at 2010 return? or if I file extension to June, I'll file 1040 as a resident for 2009 return, do I qualify for that at 2009?

Thanks