Divider
Divider

Credits Against Tax

IRS explains how unmarried taxpayers allocate first-time homebuyer credit.

March 2009
by Alistair Nevius/The Tax Adviser

The IRS has issued Notice 2009-12, explaining how the Sec. 36 first-time homebuyer credit should be allocated between unmarried taxpayers who buy a principal residence together.

Sec. 36 was added to the Code last year by the Housing and Economic Recovery Act of 2008, P.L. 110-289. It gives first-time homebuyers a refundable credit of 10 percent of the purchase price of the home, up to $7,500 ($3,750 for married taxpayers filing separately). The credit phases out for homebuyers with modified adjusted gross income (AGI) between $75,000 and $95,000 (between $150,000 and $170,000 for joint filers). The credit applies for both regular tax and AMT purposes.

To be eligible, a taxpayer must be a first-time homebuyer, defined as an individual (and, if married, the individual’s spouse) who has not had a present ownership interest in a principal residence during the three-year period ending on the date the principal residence is purchased (Sec. 36(c)(1)). Unmarried individuals may jointly purchase a residence and allocate the $7,500 credit between them (Sec. 36(b) (1)(C)).

In the notice, the Service explains that if two or more taxpayers who are not married purchase a principal residence and otherwise satisfy the Sec. 36 requirements, the first-time homebuyer credit may be allocated between the taxpayers using any reasonable method. The IRS says a “reasonable method” is any method that does not allocate any portion of the credit to a taxpayer who is not eligible to claim that portion.

This article has been excerpted from The Tax Adviser. Read the full article here (PDF).

Notice to Readers:

Members of the AICPA tax section may subscribe to The Tax Adviser at a reduced price. Contact 800-513-3037 or taxsection@aicpa.org for a subscription to the magazine or to become a member of the tax section.