Carryforward Of The District Of Columbia First Time Homebuyer Credit, Form 8859

Form 8859 helps District of Columbia first-time homebuyers carry forward unused portions of their tax credit to future years if their income exceeded the eligibility limit in the initial purchase year.

What is Form 8859?

The District of Columbia offers a First-Time Homebuyer Credit to eligible individuals purchasing a primary residence within the city. However, income limitations apply to this credit. Form 8859 allows you to carry forward any unused portion of your credit to future years if your income in the initial purchase year exceeded the eligibility limit.

Who Should Use Form 8859?

A. District of Columbia residents: You must have purchased your primary residence within the District of Columbia.

B. First-time homebuyers: This applies if you haven't owned a principal residence in the previous three years.

C. Unused credit in the purchase year: If your income exceeded the eligibility limit in the purchase year, you may have an unused portion of the credit.

What Information Do You Need to File Form 8859?

  • Amount of unused credit: This is found on line 4 of your previous year's Form 8859.
  • Current year tax liability: This is found on line 18 of your current year's Form 1040, 1040-SR, or 1040-NR.
  • Credit Limit Worksheet: Use the provided worksheet in the Form 8859 instructions to determine the maximum credit you can claim in the current year.

Things to Remember:

  • You can only carry forward unused credit, not the entire initial credit amount.
  • The credit amount is phased out based on your modified adjusted gross income (MAGI).
  • You cannot carry forward unused credit beyond future years.
  • Attach completed Form 8859 to your current year's tax return.