$8000 Housing Tax Credit for Students?

In an act of unusual clarity, the IRS has listed on its web site, specific scenarios where the $8000 first time home buyer tax credit may be claimed. One qualifying scenario(S2) fits to a tee the situation of a college student and parents buying a house or condo for the student to live in during school. It clearly states that the parents do not qualify for the tax credit but if the student is a first time buyer, he or she would qualify to claim the $8000 tax credit.

"But wait", you say, "my daughter(or son) doesn't earn enough money to use an $8000 tax credit. What good is it?"

Excellent question.

And for the answer, we again turn the the IRS and its website. (They're batting 1.000 today). If the taxpayer does not owe $8000 in taxes, or if he or she has already paid the taxes, then the taxpayer will get the tax credit back as a refund check. Wow! That would make a nice dent in the tuition bill.

The IRS even gives advice as to how the tax credit may be claimed. If a taxpayer has filed an extension for the 2008 tax return, simply claim the credit on the return filed after closing on the house or condo and get the refund in 2009. If the taxpayer has already filed a 2008 return, an amended 2008 return can be filed right after closing and the refund will be sent shortly. The taxpayer may also wait and claim the tax credit on the 2009 tax return and get the refund in 2010.

This tax credit is only good for first time home purchases until December 1, 2009 and the first time buyer must keep the house or condo for 3 years as his or her primary residence or the tax credit would have to be repaid.

New information on the IRS website affirms that the first time buyer claiming the $8000 tax credit does not have to be the one making the payments on the mortgage loan, he or she just needs to be using the property as the primary residence.

Here are links to the IRS information.

For qualifying scenarios
http://www.irs.ustreas.gov/newsroom/article/0,,id=206294,00.html

For how to claim the Tax Credit
http://www.irs.ustreas.gov/newsroom/article/0,,id=204671,00.html

This is such a great deal for college student housing that families should take a close look to see if it doesn't make sense to own a place for their college students instead of renting for 3 or 4 years.

Checking out the HOA

When you buy a college student condo or a town home, you should check out the Home Owners' Association(HOA) that runs and maintains the community. You'll want to know about the financial health of the association, what the Rules, Declarations, and Bylaws say, and if there are any critical issues facing the HOA that might affect you as a new owner.

Once you make a written offer on a condo or town home in Colorado, you are usually provided this information by the seller, through the agent representing you. In the state approved Contract to Buy and Sell Real Estate, the buyer is given a certain amount of time to review these documents and cancel the sale if they contain unacceptable restrictions. You can, however get a head start on this process and gather some of this information before deciding which condo or town home you're interested in.

Many property management firms maintain web sites that give this type of information on the communities that they manage. This is how that looks on one of our local property management firm's site.

Northfield Condominium Association Homeowners Section

As you can see, this management company makes it easy to preview the important documents before you decide if a particular condo or town home community is right for you. You might find that your 70 lb. black lab won't meet the association's 25 lb. pet restriction, no matter what kind of a diet you put him on!

Another, less official resource, is the Neighborhood Link web site that some communities post to let their neighbors and potential homeowners in their area in on what's happening. These sites are usually posted by the neighborhood's computer/internet guru who is sometimes authorized by the HOA board of directors and sometimes not. If there is a Neighborhood Link site for the condo/town home community you are interested in, it can give you a more personal look into what is happening in that neighborhood. I have linked to one such page here:

http://www.neighborhoodlink.com/ftcollins/hillpond/

These resources can give you more details about the community than just picking a random neighbor or two to talk with, but thats not a bad option either.