First-time homebuyers want to take advantage of tax credit in 2009

Q: My husband says we can get that first-time homebuyer tax credit, $8,000, for any house we buy this year, whether it's new or old. I said I'd double-check. Is that for sure? -- L.

A: The tax break isn't quite this year. You'd better get moving. Whether a new house or an existing one is purchased, the closing must take place before Dec. 1.

These days, careful lenders may require extra time to approve a mortgage loan, and in addition, legal problems sometimes surface and hold up closings. You need to get the whole thing done -- selecting the property, negotiating terms with the seller, arranging financing and arriving at the actual closing, settlement, transfer of title, by Nov. 30, 2009. That's assuming, of course, that you meet the requirements.

Buying a vacation condo

Q: My husband bought a home prior to our marriage and most of the paperwork is listed in his name only. If I were to purchase a vacation condo in another state, would I be eligible for the $8,000 first-time buyer incentive? My Realtor has assured us that I am, because I have never owned a home before, but I'm not so sure. Can you please clarify the rules for me? -- J.

A: Your Realtor may know a lot about real estate, but he or she shouldn't be giving tax information, particularly wrong information. You have two strikes against you. The tax credit is available for the purchase of a main residence, not a second home. And if either spouse has owned a house within the past three years, you're not eligible.

You may even have three strikes, for that matter. If your joint income is more than $150,000, the credit is reduced, and it disappears entirely at joint income of more than $170,000. (For single taxpayers, the figures are $75,000 and $95,000.)

Selling to son

Q: I am 75 and wish to sell my house to my 50-year-old son. It is appraised for $112,400. I am asking only $65,000. My son is frugal and has saved some money. He is a first-time buyer. The financial advisor on CNN said that people sometimes can get the $8,000 tax credit upfront and use it as part of the down payment. How is this done? Does everyone get the $8,000? -- G.S.

A: First off, no, not everyone gets $8,000. The tax credit is actually for 10 percent of the purchase price, up to a limit of $8,000. If your son qualified, his credit would be $6,500. The regulations have been changing back and forth, but as of this writing, yes, arrangements can be made to use the money as a down payment.

I'm afraid, though, that your son wouldn't be eligible, because the tax credit isn't available for someone buying from a close family member.

Don't owe that much

Q: I have always rented but would like to buy a house. A lot of my retirement income is tax-free and last year I didn't even owe $8,000 on my federal tax return. It doesn't seem fair, that if I buy a house this year I couldn't take advantage of the whole amount. -- Via e-mail

A: There's good news -- it is indeed fair. If you qualify, and if the house, condo or co-op you buy costs at least $80,000, you'll receive the full amount.

If your tax bill doesn't use up all your credit, the government will send you a check for the rest.

Hasn't owned lately

Q: One reader had a question on the $8,000 tax break that ends this year. My question: I am a former homeowner, but for the past six years I have been renting. Now, I am in the process of buying (still negotiating) and was wondering if I qualify for this federal tax credit. If so, when does it have to be repaid? -- L.H.

A: If neither you nor your spouse has owned a house during the past three years, you are a first-time buyer. But don't think of that tax break as covering the whole of this year.

It applies only to purchases with a final closing date before Dec. 1. The 2008 tax credit was pretty much an interest-free loan of $7,500, but this year's credit never has to be repaid.

Get her name off

Q: Now that we are going our separate ways, how do I get my name off of a house that my boyfriend and I purchased under a year ago together? I do not want anything to do with the house, just my name off of it. -- J.

A: Taking your name off the house is easy. I'll bet what you're really worried about is taking your name off the mortgage, and that's not easy. You and your ex-boyfriend can both sign a new deed naming him as the only owner. The deed is entered in the county's public records.

But your responsibility for the mortgage is a separate matter. You'll have to persuade him to take out a new loan in his own name and pay off the present mortgage.

Your only other resource is to go to court and force a sale, which would probably end up with everyone losing money. Next time think twice before buying a house with an unrelated partner.

Edith Lank will respond personally to any questions sent to her at 240 Hemingway Drive, Rochester, NY 14620 (please include a stamped return envelope), or readers may e-mail her at ehlank@aol.com.