TurboTax / Tax Calculators & Tips / All Tax Guides / IRS Tax Forms / What is IRS Form 8859: Carryforward of D.C. First-Time Homebuyer Credit

What is IRS Form 8859: Carryforward of D.C. First-Time Homebuyer Credit

Updated for Tax Year 2015


Form 8859 is a tax form that will never be used by the majority of taxpayers. However, if you live in the District of Columbia (D.C.), it could be the key to saving thousands of dollars on your taxes. While many first-time home purchasers in D.C. are entitled to a federal tax credit, Form 8859 calculates the amount of carry-forward credit you can use in future years, not the amount of your initial tax credit.


D.C. First-Time Homebuyer Tax Credit

If you're a first-time homebuyer in D.C., you may be entitled to a tax credit of up to $5,000. There are, however, many restrictions on the credit:

• For starters, you must have bought a home in D.C. during the current tax year
• Less obvious is the stipulation that you, along with your spouse if you file jointly, must not have owned a main residence in D.C. during the previous one-year period
• Additionally, the $5,000 credit is phased out based on your adjusted gross income:
     o As a single filer, the phase-out ranges from $70,000 to $90,000, with no credit allowed for incomes above $90,000
     o For joint filers, the income limitation is $130,000, with the phase-out ranging from $110,000 to $130,000 in adjusted gross income


IRS Form 8859

On Form 8859, you're allowed to claim a credit carry forward if you were unable to use it during the prior year. For example, if in 2015 you carried forward the credit from a prior year but could not use it due to an adjusted gross income limitation, you may be able to claim the unused credit in 2016.

Form 8859 consists of just four short lines:

• On the first line, you enter any carry-forward credit you were entitled to in the previous tax year
• On line 2, you enter your limitation based on tax liability, which you can calculate using a worksheet on the form
• Line 3 gives you your allowable current-year credit
• If the amount of your carry-forward credit still exceeds your allowable credit in the current year, line 4 shows the amount that you can carry forward to the following year


How Tax Credits Work

Tax credits, including the first-time homebuyer credit, are different from tax deductions. While a tax deduction can help you reduce the amount of your taxable income, a tax credit directly reduces the taxes you owe, on a dollar-for-dollar basis.

For example, if you owe the IRS $10,000 in taxes but qualify for a $3,000 D.C. homebuyer credit, your tax liability drops to $7,000 ($10,000 - $3,000 = $7,000). Use Form 8859 to indicate a prior-year credit and include the current year credit amount on line 54 of your Form 1040; the credit is applied after you calculate the tax on your income.


Form 8859 and Alternative Minimum Tax (AMT)

The Alternative Minimum Tax (AMT) is a separate tax system designed to prevent certain taxpayers from avoiding income tax liability. Credits from certain so-called preference items, including Form 8859 credits, are not allowed when computing your AMT income.

Taxpayers who have a significant amount of deductions and exemptions to reduce their ordinary income tax liability can face a higher tax liability under the AMT system than under the regular system. If you don't already have a lot of preference exemptions, filing Form 8859 likely will not trigger any AMT tax for you.


Get every deduction you deserve

TurboTax Deluxe searches more than 350 tax deductions and credits so you get your maximum refund, guaranteed.

For only $54.99*
Start for Free

Looking for more information?

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

Security is built into everything we do
Here's how
* Important Offer Details and Disclosures
  • Filing Deadline: IRS filing deadline for tax year 2015 is April 18, 2016 (except for residents of Massachusetts or Maine, where the IRS filing deadline for tax year 2015 is April 19, 2016).
  • Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. Free 1040EZ/A + Free State offer only available with TurboTax Federal Free Edition; Offer may change or end at any time without notice. Actual prices are determined at the time of print or e-file and are subject to change without notice. Savings and price comparisons based on anticipated price increase expected 3/18/16. Special discount offers may not be valid for mobile in-app purchases.
  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal e-file of up to 5 federal tax returns. Additional fees apply for efiling state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase expected 3/18/16. Prices subject to change without notice.
  • Anytime, anywhere: Internet access required; standard message and data rates apply to download and use mobile app.
  • Fastest refund possible: Fastest tax refund with efile and direct deposit; tax refund timeframes will vary.
  • Pay for TurboTax out of your federal refund: A $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice. This benefit is available with TurboTax Federal products except the TurboTax Home & Business/QuickBooks Self-Employed bundle offers.
  • About our TurboTax Product Experts: Customer service and product support vary by time of year.
  • About our credentialed tax experts: Live tax advice service is available via phone for your toughest tax questions; fees may apply. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Not available for TurboTax Business customers.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2014 TurboTax products.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.