First-time buyer financial assistance

If it was reported on a 1099-MISC, then it is taxable income - if the payment was intended to be tax-free, the lender would not have issued a 1099-MISC.

The program that provides this grant is the Home Sweet Texas Home Loan Program, and is intended to benefit Texas home buyers with low and moderate incomes. The presumption is that low and moderate income beneficiaries of the program would not generally be subject to a significant federal tax liability on account of this grant. Nothing on the Texas State Affordable Housing Corporation website indicated that the grants are tax-free, nor did a search of participating lender websites.

A closely related benefit promoted by the TSAHC is the Mortgage Credit Certificate, also known as MCCs, to first-time home buyers. An MCC is a mortgage interest tax credit that reduces the amount of federal income taxes you pay every year. This is the only tax-advantaged offering from TSAHC.

It is, however, important that she report the 1099-MISC so it is not treated as self-employment income.

Enter it as "Other Reportable Income".

Type "other Income" in the search window (or in the Search Topic window for desktop versions) 

• Click on "jump to other Income" (or "other income" in the Search Topic results) 

• Enter the information from your Form 1099-MISC, and click on Continue 

• Enter a description (Texas Home Buyer Grant) and click on Continue 

• On the screen with "Does one of these uncommon situations apply?", indicate "None of these apply" 

• Answer "No..." to "Did the "Texas Home Buyer Grant" involve work that's like your main job?" 

• Answer "I got it in 2020" when asked "How often did you get income for "Texas Home Buyer Grant"?" 

• Answer "No, it didn't involve an intent to earn money." 

The amount will be reported on line 8 of Schedule 1 (Form 1040).