$8,000 First Time Home Buyer Tax Credit Rules For Buying From Relatives

Added August 26, 2009 by Ilyce R. Glink

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Summary: $8,000 first time home buyer tax credit rules for buying from relatives are very specific. The IRS has specific guidelines on who is or isn't considered a relative for purposes of the first time home buyer tax credit. For the first time home buyer tax credit a relative is a parent, child, grandparent or grandchild. You cannot buy from one of these people considered as a relative and still qualify for the first time home buyer tax credit. The IRS has more detailed guidelines for the first time home buyer tax credit rules for buying from a relative.

Q:The IRS form for the $8,000 first time home buyer credit appears to define "relative" as a parent, child, grandparent or grandchild. But it does not list "siblings" as a relative.

If the IRS wanted to exclude purchases from siblings, wouldn't IRS have included that in its definition? IRS often comes up with definitions that a common person would not necessarily agree with, such as the IRS definition of a child.

With this in consideration, will a purchase from a sibling qualify for the $8000 credit?

A: Judging from my mail, there are a lot of folks who are considering buying a house from a relative, such as a sibling, aunt, uncle, niece or nephew.

For the purposes of helping buyers figure out from who they can buy a property and still qualify for the $8,000 first time home buyer tax credit the IRS defines “relative”, on its documentation as a parent, child, grandparent or grandchild.

Siblings, aunts and uncles aren’t mentioned on some of the forms but buyers are referred to IRS Publication 544 for more details. In that publication, close relative is further defined as members of a family, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc.), and lineal descendants (children, grandchildren, etc.).

So in answer to your question, if you plan to sell to a sibling, your sibling buying the home won’t qualify for the $8,000 first time home buyer tax credit. However, it appears that you can buy a home from an aunt, uncle, niece or nephew and may still qualify for the credit.

Visit our page on the first time home buyer tax credit for more rules and guidelines

While the tax credit forms may not give you the answer directly, it seems that the intent of the tax credit is to exclude close family members. Perhaps the IRS believes that family members might abuse the tax credit or set up arrangements to benefit from the tax credit without actually selling a property.

There are still plenty of other rules surrounding the $8,000 first time home buyer tax credit: The buyer must not be a relative (as defined above); must close before the end of the day on November 30, 2009; neither the buyer nor his or her spouse could have owned a home in the past 3 years; and the buyer must not earn more than $150,000 in adjusted gross income ($75,000 if its an individual purchasing the property). For income purposes, the tax phases out above those numbers.

If you’re planning to buy a home by November 30, 2009, you’re running out of time. Getting your financing in order could take at least six weeks.

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Comments

tom says

October 15, 2009 at 10:30 pm

Can you buy from your mother-in law is the question. The IRS has told me different things - 2 yes 2 no. What's the real deal?

Tom says

October 16, 2009 at 08:48 am

Since you and your wife are considered one for purposes of the first time home buyer tax credit, your wife would be buying a home from a close relative. That relationship would invalidate the tax credit. The seller of the home must not be a close relative and you wife's mother is about as close as it can get.