June 7 , 2009 - My wife and I would like to help our son buy his first home. If we co-sign on the loan with him, will he still be able to take the first-time homebuyer's credit?

The homebuyer credit is one of the most taxpayer friendly provisions to be sweetened by the American Recovery and Reinvestment Act of 2009. The ARRA extended the time available for purchasing a qualifying residence to November 30, 2009, increased the amount of the credit to $8,000, and waived the required 15 year payback rules for home purchased after December 31, 2008, as long as the taxpayer uses the home as his/her principal residence for 36 months.

IRS has posted a number of questions and answers on the first-time homebuyer credit on its web site. Some of those Q&As that shed some new light on the first-time homebuyer credit are examined below.

Ex. Taxpayer A is a single first-time home buyer. Taxpayer B (parent) cosigns for A and does not qualify. Both names are on the mortgage.Can Taxpayer A claim the credit and, if so, how much? A. Yes. Taxpayer B is not a first-time homebuyer and cannot claim any portion of the credit, but A may claim the entire credit ($7,500 for purchase in 2008; $8,000 for purchase in 2009), if the home was purchased as Taxpayer A's primary residence.

Ex. If a single person (Taxpayer A) qualifies as a first-time homebuyer at the time he/she purchases a home with someone (Taxpayer B) that is not a first-time homebuyer and then later that year they marry each other, is the credit still allowed? A. Eligibility for the credit is determined on the date of purchase. If Taxpayer A, a first-time homebuyer, buys a house and then later that year marries Taxpayer B, not a first-time homebuyer, the credit is allowable to Taxpayer A.

Ex. A taxpayer owned her principal residence. Several years ago, she decided to relocate to a rented apartment, but did not sell the former residence. Instead, she rented it out to tenants. Now the taxpayer plans to buy another house and make it her new principal residence. Does she qualify for the first-time homebuyer credit? A. She qualifies for the credit. A taxpayer who owned rental property within the past three years is still eligible for the credit. The taxpayer cannot have owned and used a home as his or her principal residence within the last three years.

Ex. A husband and wife wanted to sell the home that the wife owned when they got married. The husband had not owned a home. Could he qualify as a first-time homebuyer for the credit even though the wife would not qualify? A. No, he cannot qualify as a first-time homebuyer. The purchase date determines whether a taxpayer is a first-time homebuyer. Since the wife had an ownership interest in a principal residence within the prior three years, neither taxpayer may take the first-time homebuyer credit. The IRS requires that the taxpayer and the taxpayer's spouse not have an ownership interest in a principal residence within the prior three years from the date of purchase. The husband may not take the credit even if he filed on a separate return.

Ex. A taxpayer puchases a home that qualifies for the first-time homebuyer credit. He will be renting out two of the bedrooms and reporting the rental income on Schedule E. As long as the taxpayer meets the eligibility requirements, such rental would not cause the credit to be denied.

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