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First-time homebuyer for those without any taxable income

E-mail|Link Posted by Andrew Chan July 4, 2009 12:20 AM

I bought my home in January 2009 but do not have taxable income. How can I claim my credit?

The first-time homebuyer credit that was enacted as part of the Housing and Economic Recovery Act of 2008 does not have a minimum income limit. Therefore, those who qualify for the tax credit may file for it even if they do not have any taxable income. This tax credit is a refundable credit which means that the credit can lower your tax liability below zero and result in a refund if the credit exceeds your tax liability.

For example, if your tax liability before the credit is $5,000 dollars and the refundable tax credit is $8,000 dollars, your tax liability will be a negative $3,000 dollars ($5,000 - $8,000 = -$3,000). In your case, if you do not have any taxable income and your tax liability is zero, you should be eligible for a refund of the entire credit.

In order to claim the credit you will need to file a tax return and IRS Form 5405. Form 5405 (First Time Homebuyer Credit) should be filed with your 2008 or 2009 tax return depending on when you purchased the home. If you purchased your home in 2008, you should file for the credit on your 2008 tax return. If you purchased you home in 2009, you can file for the credit on your 2008 or 2009 tax return. If necessary, you can file an amended 2008 tax return to claim this credit.

For more information about this credit, visit the IRS’ web site at: http://www.irs.gov/newsroom/article/0,,id=204671,00.html

tags first-time homebuyer, tax credit

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About the contributors

Jill Boynton is co-founder of Cornerstone Financial Planning in Newington, N.H. Along with traditional financial planning services, Boynton provides analysis specifically for divorce.

Andrew Chan is the founder of Integrative Financial Advisors in Framingham. He provides comprehensive financial planning advice and investment management services. He has been an adviser for over 12 years and works with clients to integrate all aspects of their finances including investments, retirement, education funding, and tax planning.

Cheryl Costa is a managing director at AFW Wealth Advisors, which has offices in Natick and Purchase, N.Y. She advises clients on investing, education funding, and estate planning. She holds a master’s in business administration from Boston University.

Jamie Downey has been an accountant for more than 14 years. He's a partner at Downey & Co. in Braintree. Prior to joining the firm, he served as a manager in the audit department of accounting firm KPMG.