Thursday, August 20, 2009

DC v. Federal Tax Credits



A follow up on our recent post about the $8,000 tax credit that will soon expire, and its possible termination, extension, or even expansion: Washington DC real estate shoppers already have a tax credit available to them, a $5,000 credit, also courtesy of the federal government. While the DC-only credit is smaller, there are some advantages to the smaller credit that a buyer should consider.

While the $8,000 credit is available only to purchasers who did not own a principal residence in the three years prior, the DC credit excludes only those buyers that owned a principal residence during the prior year, and only in DC. And the DC credit requires no repayment, even if the residence is sold within three years of purchase, unlike the $8,000 credit. For a full breakdown, see the chart below

$8,000 Credit

$5,000 DC Credit

$15,000 credit (proposed)

Anywhere in U.S.

Only in D.C.

Anywhere in U.S.

Purchased principal residence by 11/30/09

Purchased principal residence in 2009 (subject to annual renewal)

Purchased within 1 year of bill’s passage.

Did not own a principal residence during preceding 3 years

Did not own a DC principal residence in D.C. during preceding year

Other: Divisible into 2 years

Ineligible if modified AGI is $95,000 or greater ($170,000 if MFJ). Phase out begins at $75,000 ($150,000 MFJ)

Ineligible if modified AGI $90,000 or greater ($130,000 MFJ). Phase out begins at $70,000 ($110,000 MFJ)


Cannot claim if claimed D.C. First-Time Homebuyer Credit in any prior year

Cannot claim if eligible for First-Time Homebuyer Credit or if previously claimed the D.C. First-Time Homebuyer Credit

Cannot claim with any other homebuyer credit

Repayment required if the residence is sold within 36 months

No repayment

Repayment if residence is sold within 24 months

6 comments:

Brandon Green on Aug 21, 2009, 11:05:00 AM said...

Thanks for breaking it down!

Matt on Aug 21, 2009, 1:40:00 PM said...

I thought that you could take both the $8k and $5k credits, as long as the purchase date is between Jan 1 and Dec 1, 2009.

From IRS web site: http://www.irs.gov/formspubs/article/0,,id=203083,00.html

You cannot claim the credit if any of the following apply.

You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. See Form 8859. This rule does not apply for a home purchased in 2009.


One of us is reading this rule wrong. Either way it is poorly worded. Is anyone a tax lawyer?

G said...

I bought a home in DC in January of 2009. When I filed my 2008 taxes, I was told I could claim the $8K credit on my 2008 return, but that in doing so, I was not able to claim the DC Credit on my 2009 return. This was told to me by the DC Office of Tax and Revenue. Not sure if that is correct. I hope not b/c I would LOVE to be able to claim that $5000 credit this year.

Anonymous said...

You cannot claim both.

You can read the 'before you begin' section here, at the top of the form
http://www.irs.gov/pub/irs-dft/f8859--dft.pdf

Matt on Aug 23, 2009, 5:49:00 PM said...

The draft form linked above is much clearer. Thanks, Anonymous.

Danielle said...

Anybody know if the DC credit has been renewed for 2010? (ie if you miss the deadline and the federal one is not extended?)

 

DCmud - The Urban Real Estate Digest of Washington DC Copyright © 2008 Black Brown Pop Template by Ipiet's Blogger Template