Lease options and rent to own homes are becoming more and more common as fewer individuals are actually able to qualify for a home mortgage. One question that many people have is that when buying lease to own homes, are they actually able to qualify for the $8,000 first time Homebuyer Tax Credit that is in effect until April 30, 2010.
Unfortunately, a lease to own contract or a lease purchase does not actually qualify you for the tax credit. The reason for this is that it does not qualify as a sale under the IRS guidelines. A bona fide sale is required in order to claim your federal tax credit as well as the tax credit that many states are offering.
So does that mean that the only way you can get the tax credit is through conventional financing?
Actually, getting a mortgage is not the only way. You can also claim your tax credit through some owner financing contracts as long as they meet the requirements for a sale under IRS guidelines. You just need to be very careful and make sure that the contract uses is in compliance. If you are already in a lease purchase deal, you may be able to re-do the contract you have so that you are able to get the tax credit.
Owner financing contract structures also benefit buyers because most of the time they also allow them to deduct interest just as they would if they had traditional financing. Of course, you should always check with a tax professional before you do anything!
The proper contract structure can pay off in a big way. As an example, people living in Georgia are able to claim their $8,000 federal tax credit plus another $1,800. Add this to the $4800 they will save a year (assuming a $240,000 home) and you can see why paying attention to your contract structure makes sense.
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