Home Buyer Tax Credit - Can I Sell the Homestead to My Children

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Real Estate Agent with Coldwell Banker Preferred Properties

Home Buyer Tax Credit - Can I Sell the Homestead to My Children

 

In the last year I have run into several parents who want to see their grown children, especially those just getting out of college, take advantage of the tax credit. I have helped several clients buy their first new house.  It has been an exciting time and I have really enjoyed that.  Sometimes parents want to get "creative" so to speak and many times I have deferred to the advice of my client's accountant or financial planner.  If you have complex family financial issues, please talk it over with the appropriate professional (which is NOT me).  I sell houses.

Home for Sale Helena AlThe other day I ran into some folks who basically wanted to "trade houses" with their parents - since their parents were getting older, they were thinking about getting a one level, and the kids had a "starter home" that the parents liked and knew had been well maintained. What a great idea - trade houses AND take advantage of the Home Buyers Tax Credit!! NOT SO FAST.

There are some rules you need to follow and the instructions for the IRS Form 5405 is a good place to look. 

When dealing with family members - Here are a few things to know:

Buyers who are claimed as dependants on someone else's tax return will NOT be able to take the Home Buyer's Tax Credit.  This can be an issue if the parents are still paying for tuition. 

Home buyers must be at least 18 years old.  So you can't buy a home in your kid's name in order toIRS FORM 5405 get the tax credit.

Home purchases from relatives of the buyer or the buyer's spouse do not qualify for the Home Buyer's Tax Credit.  According to the IRS, a relative is an ancestor such as a parent or grandparent, lineal descendants such as child or grandchild, and spouses.  So, you can't sell your house to your son and get a tax credit, or pass down the family farm and get a tax credit.

To claim the Home Buyer's Tax Credit, you fill out IRS Form 5405 and send that form, along with the HUD-1 Settlement Statement which you get at closing, in with your return.  You cannot e-file if you are claiming this credit. If you purchase the home in 2010 and you haven't filed your 2009 return yet, you can send it in then, or if you have already filed, you can file an amended return.  You can go to the IRS website to get the form, instructions and other useful information.

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Topic:
Home Buying
Location:
Alabama
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home buyer tax credit

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