The federal government’s “first time home buyer tax credit” applies to real estate properties purchased by a person who has never owned a home in the past, so long as the purchase is completed by the deadline that has been set for the program (but may be extended again).
Q. Can a taxpayer claim the first-time homebuyer credit if the purchase is pursuant to a seller financing arrangement (for example, a contract for deed, installment land sale contract, or long-term land contract), and the seller retains legal title to secure the taxpayer’s payment obligations?
A. If the taxpayer obtains the “benefits and burdens” of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property. (7/2/09)
The above linked page provides a number of important requirements, so it is worth reading start-to-finish. But in most cases, a home purchased via the most basic Land Contract will not be eligible for the first time home buyer tax credit — unless that land contract is structured to cover the terms listed above.
To get a complete overview of the typical Land Contract process and the legal forms required to complete it, see Standard Legal’s Land Contract legal forms software.