<p>I have a question for some of you financial aid/FAFSA experts.</p>
<p>If a college student (age 22, not independent) purchases a home this year and is eligible for the first-time home buyer tax credit, he/she is eligible to receive up to $8000 essentially in the form of a tax refund when he/she files an amended 2008 return or the 2009 tax return. (10 percent of home purchase price up to $8000).</p>
<p>Let's say an eligible student purchases a $45,000 fixer-upper home and gets a $4500 tax credit on his/her return. When he/she files FAFSA next year, is this reported as income, and if so, is it subject to the 50% rule as far as income to be counted by the dependent student toward the family's EFC?</p>
<p>I'm afraid this will be a case of the government giving and taking away all at the same time... (sigh). I hope I am wrong, because it wouldn't pay to apply for the tax credit if it pushed the family's EFC over the threshhold for Pell Grant/ACG/Smart Grant eligibility.</p>
<p>a credit is a reduction of taxes owed. I do not know how this tax credit will be handled if the person doesn’t owe that much in federal taxes. If it is refundable or not??? I understand your question, don’t know the exact answer</p>
<p>Yes, the excess amount would be refundable, thus it would generate additional income and I am fearing the implications it may have on his FAFSA. I am hoping that someone who is more “in the know” would be able to help me!</p>
<p>my ‘gut’ says it wouldn’t be. But I don’t have proof for you. Call H&R block and ask them. There are other types of refundable tax credits so they should know the answer (I’m sure all real tax people who would read this board are very busy this time of April!)</p>
<p>FAFSA does currently allow for education credits so that they do not negatively affect the FAFSA EFC. The only other refundable tax credits I can think of off hand are the child tax credits and they are not included as untaxed income on FAFSA (I just looked). I have a feeling we will not know the answer to this question until much later in the year.</p>
<p>how would an earned income credit work? They are refundable, right? Is that counted as income on the next years taxes/fafsa? I would <em>think</em> that all refundable tax credits would work the same way</p>
Pretty sure they’re not experts. It’s a brand new credit and they don’t do FAFSA;s. </p>
<p>It is definitely a refundable credit. I don’t see how it could be considered income. But then, I’m not a FAFSA expert either.</p>
<p>Remember that it must be the principal residence of the person purchasing the home. If this person is already worried about need based financial aid, where are they getting $45,000 to buy a house with? If they don’t have this kind of money, how are they qualifying for a mortgage?</p>
<p>At the current time, there is no way to know how the FAFSA will treat such a refund. Since this refund would come from the 2009 tax return and be reflected on the 10-11 FAFSA…and the rules for 10-11 are still being negotiated. It may have to be reported as income, but it may be omitted…who knows.</p>
<p>I don’t see any provision in the current (09/10) FAFSA for reporting this credit using 2008 tax info, do you Nikki? Looks like the tax line for students just gets entered as 0 and the instructions for untaxed income specifically exclude earned income credit, child tax credit,etc. So, it likely will not make a difference but the safest course might be to take 3bm103’s suggestion and simply amend the 2008 return. Details of this are on IRS site here:
[First-Time</a> Homebuyers Have Several Options to Maximize New Tax Credit](<a href=“http://www.irs.gov/newsroom/article/0,,id=205416,00.html]First-Time”>http://www.irs.gov/newsroom/article/0,,id=205416,00.html)</p>
<p>You would definitely want to have that money spent or out of the student’s accounts by FAFSA time next year though or you will see an EFC impact!</p>
<p>I think the OP is also wondering if the govt will issue a 1099 of some type so it’s reported as income. That doesn’t happen with tax credits, does it?</p>
<p>Grad students! Sue, see post 10 & 11 - there is no line for reporting these refundables, in fact FAFSA instructions specifically state do not include them as non taxed income. The education tax credit is reported but is a lttle different (formula backs out of equation).</p>
<p>I would consider doing this for my D if she were farther along…6 years worth of room would make a sizeable dent in a mortgage and she’ll likely have to do summer courses just to finish in that time. An $8K inducement is tempting…but of course no one would write a mortgage for an 18 year old without a trust fund!</p>
<p>There are 1st time buyer programs, VA programs, and HUD funding for low income people. I’ve been having a tough time selling a house for the past 4 months (in a neighborhood where houses never sit for more than a month) because the credit market is so tight. Finally found a buyer who can actually get approved for a mortgage but is putting nothing down (gov’t loan) and I have to pay all his closing costs even after coming down 10% on price! It’s a very good deal for him as alot was done to get it market ready (new kitchen, carpets, paint, etc.) and he will get the full $8K tax credit back.</p>
<p>Oh well, it’s still one of the few houses with a buyer around here and everyone else seems to be coming down an average of 20% on selling price. It’s a really good time to be the buyer if you have the cash or credit to do so.</p>
<p>For those of you who have purchased a home for the first time and received the tax incentive which could be $8,000 do not allow colleges to convince you that this has to be reported in your fafsa. I had to call FAFSA many of times until I was told that I can reach out to my fafsa regional office. The fafsa regional office in Illinois confirmed to me that this tax credit is not to be noted in your Fafsa which if you allow the college to convince you otherwise the outcome could affect the EFC. My son almost lost his Pell and map grant because they went into my son’s Fafsa and made changes by including the $8,000 which I disputed and then corrected the application.</p>
<p>This is not earned income. The home buyers first time buyers program was setup to assist in your first home purchase and of course to stimulate the economy.</p>
<p>If your your childs financial advisor can’t help you then go to the director of financial assistance at your school. If this does not work go to the Dean of admissions. If the school still refuses do not hesitate to contact your state regional office. Hope this helps for all those that may have been guided the wrong way.</p>
<p>Your school’s financial aid office is NOT going to be swayed by the “FAFSA regional office,” assuming that is a help line you are calling. Phone operators do not have the weight of the Department of Education auditors. </p>
<p>If you believe your school is counting something that it should not count, you should go through the chain of command in the school’s financial aid office. Someone will be able to explain why something is/is not counted. If you truly feel the school is incorrect, you should contact the Federal Student Aid Ombudsman.</p>