What is the D.C. First-Time Homebuyer Credit Carryforward?
The D.C. First-Time Homebuyer Credit was a federal tax credit available to individuals who purchased a principal residence in the District of Columbia. Although the credit itself has expired, taxpayers who claimed it in prior years—specifically between 2008 and 2010—may still be eligible to carry forward any unused portion of the credit to future tax years until it is fully used.
How much was the original credit?
The credit amount was the lesser of:
- $5,000 for most filing statuses
- $2,500 for those filing as Married Filing Separately
- The actual purchase price of the home
What were the income limits?
The credit was subject to income-based phaseouts:
- For Single filers, the phaseout began at $70,000 and ended at $90,000
- For Married Filing Jointly filers, the phaseout started at $110,000 and ended at $130,000
Taxpayers with income above the upper limit were not eligible for the credit.
Who qualified for the credit?
To qualify, the taxpayer must have:
- Purchased a home in D.C. on or before December 31, 2011
- Not owned a principal residence in D.C. during the one year before the purchase
- Met the income requirements listed above
How does the carry-forward work?
If you were eligible for the credit but could not use the full amount due to tax liability limits, you may carry forward the unused portion to future years. This is done using IRS Form 8859.
What is IRS Form 8859?
Form 8859 is used to report the carryforward of the D.C. First-Time Homebuyer Credit. It includes:
- Line 1: The amount of unused credit from the prior year
- Line 2: The current year’s tax liability limitation
- Line 3: The allowable credit for the current year
- Line 4: Any remaining credit to carry forward to the next year
How does this credit affect your taxes?
Unlike deductions, which reduce taxable income, tax credits directly reduce the amount of tax owed. For example, if you owe $4,000 in taxes and have a $1,000 credit, your tax liability is reduced to $3,000.
Does this credit affect the Alternative Minimum Tax (AMT)?
Credits claimed on Form 8859 are not allowed when calculating AMT. However, unless you have significant preference items or deductions, claiming the carry-forward credit is unlikely to trigger AMT liability.
Where can I find more information?
You can access Form 8859 and its instructions on the IRS website:
About Form 8859
Form 8859
Form 8859 Instructions