Saving Your Homebuyer Credit

Today TaxMama hears from Kerry Tomlinson at KATU News in Portland, Oregon. Kerry tell us. “We heard from some viewers this morning about their experiences with the homebuyer tax credit. One woman says she was disqualified because she was deducting mortgage interest on an RV as a second home. She has fought it, providing documentation to the IRS, and they have still rejected her.”

Dear Kerry,

This is so disturbing. Let’s see just how we can help people, OK?

Here are some guidelines to protect your homebuyers credit:

1)       When you get a rejection from IRS – and you know you’re entitled to the credit – respond to IRS immediately and tell them why their rejection is wrong.

2)       Since they are rejecting First Time Homebuyer claims from anyone who shows a Form 1098-Mortgage Interest Expense in their prior year files – get ready to provide proof that the mortgage they are seeing has nothing to do with your personal residence.

a.       IRS is rejecting people whose mortgage interest CLEARLY comes from places like Hilton Resorts, Wyndham Vacation Properties, etc. i.e. timeshares. Send a copy of the contract that shows you’re only entitled to one or two weeks on the property – you cannot possibly be living there!

b.       You are entitled to own other real estate and still get the Homebuyers Credit. So provide proof that the mortgage they see is on a rental property, or a vacation home, or a boat or RV that you use for recreation, or any other property where you do not live.

3)       Provide proof of where you lived before buying the new home.

a.       Provide a copy of your rental contracts for the last 3 years.

b.       Provide a copy of your old drivers license showing the address – that it was NOT the address on the property or vehicle shown on the 1098 form they have on record.

c.       Provide any other proof AND a cover letter, explaining what that mortgage is for and why it was not your residence.

4)       People who have yet to file for the Homebuyers Credit – be pro-active. If you know your name is on a mortgage anywhere out there (you signed for your brother, your name is on Mom’s loan, etc.), include an explanation about that UP FRONT. It may save time.

5)       If you are still rejected after two attempts to explain, and calling IRS gets you nowhere? Call the Taxpayers Advocate Service at 877-777-4778, your Congressional Representative and your Senator.  If you are legally entitled to the credit, IRS may not withhold it from you.

And remember, you can find answers to all kinds of questions about the homebuyers credits and other tax issues, free. Where? Where else? At www.TaxMama.com.

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