What is unearned credit tax?

Homebuyers Tax Credit (not a first time buyer) - Does the Gov send you a check? What about the 5 year rule?

• Hi, I am looking at buying a second house. We now live in a duplex that was bought in 2007, need more space already for growing family and have been saving for a larger single family and planning to keep the other house as income property. Unfortunately, with economy as it is we've ruled out a single family house but are still looking at getting a larger duplex with 3 bedrooms and finishing the basement. Prob more info than you needed, but I'll get to the point: I know it's only eligible to 10 percent of the house price (and only to $6500 instead of the $8000 for first timers), but how does the tax credit actually play out? What if my taxes are less than $6500, does it just cap off so I wouldn't pay any taxes that year or would I get a check back in addition? And what of the rule that you must live in your house for five of the last eight years - on that I'm confused because if you're buying a new house how could you already have lived in it? Are they giving tax credit to any old regular homeowners now too? I thought the credit was only to help spur people into buying new houses ( and thus help reduce the glut of houses for sale). Obviously there is more to this than I understand, your help is a lifesaver. Here's a specific example for the sake of clarity: Say you bought the duplex you currently reside in back in 2007 ($170,000). Will be buying new, larger duplex in April / May of 2010 ( $195,000). Since its a duplex, my read is that you're only eligible for half the amount of the house (which in this case is over the limit anyways, but to be complete I'll finish the idea) so take --- $195,000 / 2 = $97,500 then take that $97,500 * 10% and you get a $9,750 (of which you'd only be eligible for $6,500 as a non-first time buyer). Then say you had a tough year financially at work and in addition had to spend quite a bit on renovations for the current duplex to make it nicer for increased rent in the future and better quality tenants. So say that house took on a significant loss and your total tax amount owed in 2009 was a mere $3500. Tax credit = $6500 2009 amount owed = $3500 ***** Is the additional $3000 lost? Will they cut a check? Or does it carry the rest over and reimburse that amount for 2010 taxes? If it is just lost and you know 2010 is going to be a better year at work, then could you consider waiting to have the credit applied to 2010 when you'll be owing a larger tax amount? I hope this makes sense, and any comments are appreciated to help clear up my understanding or even if you could just quickly affirm that this is basically correct. I'm still unsure on the 5 year thing however.... You're the BEST!!!

• Answer:

  It is a credit, you would get a check for the difference. You are not eligible because you have not resided in your current home for 5 yes but only 3. So forget all the math none applies to you