Q: I have e-mailed the President and my legislators and no one has answered my question.

Three years ago, I sold a rental property in Maryland and used the proceeds to buy a single family house near where my son lives in North Carolina so he could rent from me. After weathering an extended period of unemployment, he purchased the house from me in February 2009 when he was able to qualify for a mortgage.

What I can’t find out is why he is excluded from getting the first-time homebuyer tax credit. We are not crooks and cheats.

The legislators I contacted didn’t even know such a restriction existed and I have not been able to find this issue addressed anywhere on the internet.

How does a person challenge such a provision? I am a retired teacher and neither of us can afford a lawyer. And, we shouldn’t have to get a lawyer to challenge an unfair law.

A: Unfair or not, the IRS has carved out an exclusion for family members buying from each other to weed out people who might be giving sweetheart deals to family members just to claim the $8000 first time home buyer tax credit.

According to the IRS, you cannot take the $8000 first time home buyer tax credit, even if you buy a principal residence, if:

  1. Your income exceeds the phase-out range. This means joint filers with modified adjusted gross income of $170,000 and above and other taxpayers with modified adjusted gross income of $95,000 and above.

  2. You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.

  3. You stop using your home as your main home.

  4. You sell your home before the end of the year.

  5. You are a nonresident alien.

  6. You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year.

  7. Your home financing comes from tax-exempt mortgage revenue bonds.

  8. You owned another main home at any time during the three years prior to the date of purchase. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another main home at any time from July 2, 2005, through July 1, 2008.

I’m sorry that your son is excluded from taking advantage of the $8000 first time home buyer tax credit. There is more information on the IRS website on the $8000 first time home buyer tax credit issue at www.IRS.gov. You can search this issue on their site by typing in the words “First Time Home Buyer Tax Credit.”

For additional discussion on this issue read the following stories:

$8,000 Tax Credit Downpayment Relief: The Treasury Department Giveth and Taketh Away

Completion Date is Key to $8,000 first time home buyer tax credit

Repaying The $8,000 First-Time Home Buyer Tax Credit

Take a look at our at our topic page for more tax credit articles and first time home buyer articles.

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