First-Time Buyer Credits

• Unless it is adequately explained to them, people may enter into an option-to-buy contract assuming that they have gained an equity position in the property. This is not the case. What they have secured is a first right of refusal or the right to purchase the specific property at a specific price by a specific date. Because they do not have any form of ownership in the home, they are not eligible to take a first-time buyer's credit on their income tax.
  
  

Who is Considered a First-Time Home Buyer

• The American Recovery and Reinvestment Act of 2009 offered a credit equal to 10 percent of the purchase price of the home, with a maximum available credit of $8,000, or $6,500 for repeat buyers who purchased a home before September 30, 2010. The original deadline was June 6, 2010. The U.S. Department of Housing and Urban Development defines a first-time home buyer as anyone who has not owned a house for three years before the day that they purchase a home. This meant that buyers with an option to purchase had to exercise their option and close on their house before September 30, 2010.
  
  

Income Limits

• The American Recovery and Reinvestment Act of 2009 also reduced the tax credit for married couples filing a joint return with a modified adjusted gross income of $150,000 to $170,000. Taxpayers earning more than $170,000 were not eligible for the credit. Single taxpayers who earned a modified adjusted gross income of $75,000 to $95,000 also faced a reduced credit; those earning more than $95,000 were not eligible. Although this credit has expired, the act may serve as a model for future credits. The federal government may still issue other credits, but state grants are available for first-time homebuyers that may be used by buyers who exercise a rent-to-own option.
  
  

Penalty for an Early Sale

• Buyers who filed for the credit are still subject to a recapture or repayment of the credit if they do not own their home for at least three years. Anyone who took the credit and then sells their home before three years will have to return the amount they claimed, although certain exceptions may be made due to death or divorce. If you exercised an option to purchase your home and took the credit, the ownership date stems from the date of your closing and not the date you exercised your option to buy.