$8,000 First Time Home Buyer Tax Credit Has Time Requirement

Added October 1, 2009 by Ilyce R. Glink

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Summary: $8,000 First Time Home Buyer Tax Credit Has Time Requirement
Most people know that the $8,000 first time home buyer tax credit will expire at the end of the day on November 30, 2009. Most people know that the $8,000 first time home buyer tax credit is only for home buyers that have not owned a home during the p3 years prior to the date of the home purchase and have an income below $75,000, if single, or $150,000, if married. They also might know that the first time home buyer credit can't be taken if your income is above those amounts (it phases out), or if you buy a home from a close relative. Now we get a question from a reader that wants to know if he gets the credit, will he get caught if he does not plan to live in the home as his primary residence for the required 3 years following the purchase.

$8,000 First Time Home Buyer Tax Credit Has Time Requirement

Q: I have a question that no one seems to have an answer for, including a few mortgage brokers I called.

If you apply for the $8,000 tax credit, you’re supposed to live in the property as your primary residence for three years. Here’s my question: How would the government know if you move out before the three years of residence is up?

I would rush to buy a house right now (in cash, to avoid the loan process, which would expedite the closing enormously), however I would not be willing to live in that house very long. The property would be in Phoenix, and I don't care much for Phoenix.

Please don't suggest I buy somewhere else instead. Would I get caught and have to refund the money? Thank you in advance for your prompt response.

A: Yes. You would get caught and should get caught. There’s enough government waste in government programs as it is without downright fraud by taxpayers. And if your intent is to get the tax credit and not live there for the time required under the law, you are committing a fraud and should get caught.

The government has started to take a close look at tax returns that request or apply for the $8,000 first time home buyer tax credit.

If the primary residence listed on your tax return address is different than the primary residence that you purchased, that will be a big red flag for the IRS. But there are other ways the government can check to determine if a buyer is using the property as his or her primary residence.

Think about all of the mail that should go to your primary residence. If your tax statements from banks change or your employer W-2 statements don’t go to your home, the government may take a closer look at your tax return.

All of this information is run through the IRS, which has (I'm told) set up complicated computer systems to check for just this sort of scheme. So, my belief is you would get caught and would have to repay some or all of the $8,000 tax credit plus you may have additional penalties to pay for the fraud.

In your case, you clearly are willing to cheat the IRS to get the full benefit of the tax credit without living by the rules.

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The 2009 $8,000 First Time Home Buyer Tax Credit is due to expire at the end of November 2009, stay posted for updates on Ilyce's Blog.

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