Q: I've heard that the new home buyer’s credit, scheduled to run out in December 2009, has been continued into 2010.  I would be very interested in buying my first home, but how can a person with a disability, who is buying their first home, avoid a reduction in their SSI as a result of claiming the $8,000 first time home buyer tax credit?


A: This is one of those situations, where, upon first glance, it appears that people with disabilities receiving benefits cannot fully participate in an asset building opportunity.  However, with planning and access to information, these barriers can be overcome and actually provide a great opportunity to improve one’s economic situation.

The homebuyer’s tax credit has indeed been continued, however, potential recipients must be in contract for the purchase of their first home by April of 2010.  You are correct to be concerned with the effect of the credit on your SSI eligibility.  If one qualified for the full credit, and received the $8,000 dollars, recipients would exceed the $2,000 dollar SSI asset limit thus threatening their income stability and linked medical coverage. 
In addition, for many people with disabilities who receive SSI, it is nearly impossible to accrue a down payment for home purchase, given these restrictive asset accumulation limits.  This reality, in combination with the $8,000 credit consideration, at first glance, would seemingly rule out participation by individuals receiving benefits.

However, this roadblock, in actuality, provides the forward thinking SSI recipient an excellent planning opportunity to acquire their first home.

Several States, municipalities and organizations have recognized that the $8000 credit could, if properly leveraged, serve as a down payment for many low to moderate income families. Thus, this issue has been addressed through the use of a financial instrument known as an anticipatory loan. 

For example, a consolidator or mediator arranges for down payment funds to be loaned to the buyer.  Those funds are placed in an escrow account, and serve in part or in hole as the down payment, for the home purchase.  Once the home is purchased, the home buyer now qualifies for the credit, and the funds received from that credit are used to repay the original loan.  This transaction is all done by loan, no income to the recipient, thus no offset to SSI.

You can read more about this strategy in our EQUITY newsletter June 2009 http://www.wid.org/programs/access-to-assets/equity/equity-e-newsletter-june-2009/equity-program-of-the-month/