$8,000 First Time Home Buyer Tax Credit Will Expire December 1, 2009, Will It Be Extended
Added September 3, 2009 by Ilyce R. Glink
Summary: Will the $8,000 first time home buyer tax credit be extended? This and other questions about the first time home buyer tax credit are on the minds of home buyers as they try to figure out the best deal in the housing market. Should a daughter buy a house from her parents or should she use a quit claim deed? There are income restrictions and rules against buying from relatives under the first time home buyer tax credit regulations. How long do first time home buyers have left to find a house before the deadline to take advantage of the first time home buyer tax credit?
Will The $8,000 First Time Home Buyer Tax Credit Be Extended
Q: I am recently divorced. My ex-wife and I own a house together worth $250,000. Both of us moved out, and our daughter and her family moved into the house and are renting it from us.
Our daughter would like to buy the house. Is it better to do a quit claim deed to transfer our interest in the house to our daughter or have her buy it from us at its present market value and have her get the $8,000 first time home buyer tax credit?
A: I think your daughter would be better off tax-wise if she bought the property from you. But whether you give it to her or she buys it, she will not qualify for the $8,000 first time home buyer tax credit. The IRS specifically excludes parents, grandparents, children, and grandchildren buying from each other.
You can look up the rules on the IRS.gov web site or check with your tax advisor for more details.
Either way, make sure you have an attorney draft whatever paperwork you're going to execute for the deal (whether you transfer your interests by quit claim deed or warranty deed, put the property in a trust that names your daughter as beneficiary, or sell it to her) to make sure you are protected.
If your property has appreciated greatly over time, your daughter may be better off inheriting the property from you rather than receiving it as a gift. If she takes the home as a gift, when she sells the home she’ll pay taxes on all the appreciation that you have enjoyed in the property. But if she inherits the home and sells it shortly thereafter, she may wind up paying no taxes on the sale of the home.
On a final note: Although there has been a fairly strong push from housing-friendly lobbying organizations, including the National Association of Realtors, Mortgage Bankers Association of America, and the National Association of Home Builders, Congress left for the August recess without extending the $8,000 first time home buyer tax credit.
If you’re planning to use the credit (you’re a first time home buyer or haven’t owned a property in the past 3 years), you’d better get moving. My sources tell me that if you haven’t found the property, you want to buy by the end of September, you’ll run out of time to use the $8,000 first time home buyer tax credit because of the time it takes to get qualified and approved for your mortgage and to schedule the closing.
The weekend before the $8,000 first time home buyer tax credit expires is Thanksgiving, which means no business will be transacted on Thursday. The number of people trying to cram in closings in that final week will be enormous, so you’ll need to reserve your time early.
My sense is that Congress may extend the deadline for the $8,000 first time home buyers tax credit into 2010 and may expand the program to include all home buyers. But home buyers won’t know about an extension until it’s almost too late to use the credit.
Bottom line: If you are a first time home buyer and want to purchase a house, get moving before the $8,000 first time home buyer tax credit expires.
Get more information about the $8,000 first time home buyer tax credit, including income restrictions on the $8,000 first time home buyer tax credit and rules on buying from relatives when you want to obtain the $8,000 first time home buyer tax credit
See more articles on this topic by clicking on the "RELATED ARTICLES" above and to the right.
We have over 5000 articles on Real Estate Advice, Personal Finance Advice and Consumer Advice on our site. We encourage you to look at these articles. As always, if you have a comment on our articles, don't forget to post your comment below. We thank you for coming to ThinkGlink.com.
© Ilyce R. Glink. All rights reserved. This content may not be used, distributed, syndicated, compiled or excerpted in any medium or form without written authorization from Think Glink, Inc. For information on syndicating ThinkGlink.com please contact us.
Additional Topics
(View All Topics)IRS down payment first time home buyer home buying homeowners mortgage mortgage lenders mortgage loan personal finance advice real estate real estate advice real estate agent real estate market tax credit taxes
Related Articles
Related Blog Entries
Top Rated Articles
Related Videos
Are You Ready To Buy A Home?
Before you call a real estate agent, before you ma...(1:30)
Comments
Bill says
I must take issue with the NAR’s claim that the First Time Home Buyer Tax Credit “has definitely been a success.” It’s true the first time home buyer market is (mostly) the only one making any moves, but the very modest gains we’re seeing hardly qualifies as a huge success for the program. When compared with another government incentive program, Cash for Clunkers, which sold 690,000 cars in two months, the First Time Home Buyer Tax Credit seems downright underachieving! Why are we not seeing more people scramble to take the Nov. 30 for this tax credit? If you’ll remember, as Cash for Clunkers was winding down, car dealer were advertising extensively. “Push it, pull it, just get your car down to Harrelson Ford and get $4500,” they screamed. The real estate industry is not trumpeting the benefits of the First Time Home Buyer Tax Credit nearly as well. There are other reasons the program is not achieving as well as many hoped, but the bottom line is time is running out. Instead of begging for more time, the NAR and all of us should be making the most of the time left.
Fred says
You're wrong, Bill. A study just came out that shows the increase in the economy and housing market that this stimulus package caused. As for the real estate market trumpeting the benefits, I have personally seen it advertised in just about every sub 350k house I have looked at. Real estate companies are posting it online also. This package has been incredibly effectie at reducing the current housing inventory which in turn, stimulates the economy in many other ways.
Victor says
Extending the Tax Credit is bad idea. Even the biased and misleading NAR recognized that most buyers were going to buy anyways, only a minority did it due to the credit. What this Tax Credit is doing, is to re-inflate the bubble because Sellers and Realtors are adjusting prices up as a reaction to buyers who have more money available. Let the free market do its job of cleaning this mess! Falling prices is not the problem, it is the solution. What we are going through is a correction (btw, that is good). We just can’t get us out of this mess by trying to re-inflate housing. At this stage, stimulating is equivalent to re-inflating the housing bubble. Eventually this program is going to have to end, and when it happens, we are going to have a crash, a hangover (just as for cash-4-clunkers). The bigger the Tax Credit, and the Longer, the harder we will fall again. This type of measures don’t create momentum, they just delay and send problems to the future. How can we be speaking of a "recovery" with all of this Government intervention? The government should stop trying to "help" with moratoriums and tax credits, eventually they will have to go away and the crash will come back with revenge (not to mention the extra debt acquired).