8/14/2019 Form 5405 First Time Home Buyer Tax Credit F1 H1B TN Visa Taxes

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Form 5405 - First Time Home Buyer's Tax Credit - F1, J1, L1, H1Bvisa taxes

First Time Home Buyer's Credit - F1, J1, L1, H1B visa taxes.

This article addresses the recently-passed First Time HomeBuyer's Credit.

In an attempt to recover from the recent problems in the home-

building section of the economy, Congress passed the Housing

and Economic Recovery Act of 2008 that gave a $7,500 “credit”

to U.S. Residents who purchased their first home in 2008. The

credit was not REALLY a credit, however, but actually an

interest-free loan that would be repaid over 15 years ($500

per year). It required that the buyer buy the home between 8

April 2008 and 1 July 2009 and that they own and live in the

home for at least 36 months from date of purchase.While the credit was well received by the American public, it

became obvious that it was NOT having the desire effect. For

this reason, Congress modified the credit in the American

Recovery and Reinvestment Act of 2009. In this law, the credit

was increased to $8,000, and, unlike the previous law, it was

a TRUE credit with no payback provisions for purchases made in

2009. The old $7,500 “credit” (with the 15-year payback

requirement) still applied for purchases made in 2008.

Under the new law, the credit applied to any purchase of a

home in 2009 before 1 December 2009. The home must be used as

the buyer principal residence. The $8,000 credit reduces the

taxes of the buyer. If the buyer's tax liability is LESS than

$8,000, the credit is fully refundable, meaning that the extra

credit above the tax liability is added to the buyer's refund.

The $8,000 does NOT have to be repaid if the buyer owns and

occupies the house for at least THREE years from date of

purchase. Further, if the house is purchased in 2009 prior to

1 July 2009, the buyer can amend their 2008 tax return and

request the $8,000 credit in that amendment. If the house

purchased on or after 1 July 2009, but before 1 December 2009,

the credit can be requested on the 2009 tax return.As with any tax law, there are requirements to meet. To

qualify:

• your income cannot exceed $95,000 if you are single or

$170,000 if you are married.

• You cannot be eligible to claim the District of

Columbia's First Time home buyer credit for 2008 or any

prior year.

• The home's financing cannot come from tax-exempt mortgage

revenue bonds.

• The home MUST be located inside one of the fifty statesin the U.S.

8/14/2019 Form 5405 First Time Home Buyer Tax Credit F1 H1B TN Visa Taxes

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• The home cannot be inherited or received as a gift.

• You cannot buy the home from a related person who is your

spouse, ancestor (parent, grand-parent, great-

grandparent, etc.) or lineal descendant (children,

grandchildren, etc. Note, however, that you CAN purchase

the house from a sibling or from an aunt, uncle orcousin.

• You cannot buy the home from a corporation or partnership

in which you have a controlling interest.

• You cannot have owned a main home (this includes

apartments and condominiums that served as your main

home) in the 36 consecutive months prior to the purchase.

This includes any home which you own in your home

country!

• Finally, you must be a citizen or resident alien of the

U.S.That last provision is the one that is most pertinent to our

clientele. If you are a non-resident or dual-status alien, you 

do NOT qualify for this credit. However, if you file jointly

with your spouse and you both CHOOSE to be treated as resident

aliens for all of 2009, you DO meet the criteria to claim this

credit, just as long as you buy the house before 1 December

2009.

Given the current housing market, many persons in the U.S. on

H-1, H-1B and L-1 visas will be tempted to take advantage of

this situation to buy a home at discounted prices, with very

favorable interest rates, in order to claim the $8,000 credit.

However, you must carefully consider exactly to what you are

committing yourself and what consequences you will face if you

cannot meet all of the requirements.

The biggest consideration is the requirement that you must

live in the house for three years from date of purchase! Jobs

under the H-1 and L-1 visas, by their very nature, tend to be

temporary. While it is true that many jobs last up to six

years and beyond, just as many jobs will end after six

 months, often with little or no notice. You may be required tore-locate to another city or state within the United States,

or even be required to return to your home country. If this

happens, and you must sell the house within 1-to-2 years of

purchase, it is likely you will NOT recover the costs you

incurred when you originally purchased the house. These costs

typically run between 3-to-4 percent of the cost of the house.

Further, you will have to pay costs to SELL the house, which

can run up to 10% of the house's sales price. Finally, because

you did not own the house for at least 36 months after

purchase, you will be legally obligated to return the $8,000 credit you received . While there are exceptions that allow

8/14/2019 Form 5405 First Time Home Buyer Tax Credit F1 H1B TN Visa Taxes

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this repayment to be forgiven, a job change or employer-

 mandated move is NOT one of those exceptions!

For these reasons, you must carefully consider all aspects of

your home-buying decision before you go forward with your

purchase.

If you have any questions, please Contact Us or post your questions in the Forum.