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Merlo
Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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This is in regards to the existing home buyer tax credit.

Resolved Question:

This is in regards XXXXX XXXXX existing home buyer tax credit. We are a military family and will have owned our home exactly 3 years on June 15, 2010. We have received orders and will be moving this summer. We have decided to rent out our home and buy at our new location. We found a house and went under contract on April 23rd and are scheduled to close on May 28th. First, do we qualify for the tax credit? If yes, can we still close on the 28th of May or do we need to move it back to June 15th?
Submitted: 4 years ago.
Category: Tax
Expert:  Merlo replied 4 years ago.

Hello JA Customer,

 

The eligibility requirements for military members are actually no different than for any other taxpayer. The only difference is that military members serving outside of the US have extra time to buy a residence, but they must still satisfy the other rules.

 

Members of the military and certain other federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the credit. Thus, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2011. If a binding contract is entered into by that date, the taxpayer has until June 30, 2011, to close on the purchase.

 

In order to qualify for the existing home buyer credit, you must still first satisfy the rule which states that you must have owned and lived in your primary residence for at least 5 consecutive years out of the last 8 years preceding your new purchase. Since you owned your home less than this amount of time before purchasing a new residence, you would not qualify for this credit. I am sorry I could not provide you with a more favorable answer.

 

If this was helpful please press the Accept button.

 

Thank you JA Customer

 

 

Customer: replied 4 years ago.
I thought the rules for military were 3 years instead of 5? I looked at "federalhousingtaxcredit.com" and they stated under the military section, "qualified service members who sell or move from a tax credit home within 3 years of the initial purchase due to official extended duty are exempt from the recapture rule.
Expert:  Merlo replied 4 years ago.

Hello again JA Customer,

 

Yes, I am very familiar with that website and also with the special rules for military members. But the rule that you quoted has nothing to do with the actual purchase of a new home.

 

The credits which are being offered for the first time homebuyer and for existing homeowners require that once you purchase a new home, you must remain in that home for 3 years and use the home as your primary residence. If you do not remain in the home for at least 3 years, then any credit you receive must be repaid or "recaptured". There is an exception to that rule for military members, and that is the exception you quoted. In other words, assuming that you qualified to begin with to receive this credit, if you purchased a new home and then were forced to move prior to staying there for 3 years due to extended duty, then you would not be subject to that repayment or recapture of the credit.

 

This rule is not stating that you qualify for the credit by only owning a home for 3 years instead of 5. You still must meet the 5 year rule to begin with in order to qualify for the credit. If you could meet that rule and qualify for the credit, then all that rule that you quoted is saying that if you were forced to sell your new home prior to staying there 3 years due to extended duty, you would not have to repay the credit.

 

If this was helpful please press the Accept button.

 

Thank you JA Customer

 

 

 

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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