Is down payment assistance provided under a program sponsored by a tax-exempt organization includable in the homebuyer¡¯s income?
Generally, down payment assistance will not be included in the homebuyer¡¯s gross income for federal income tax purposes. However, if the buyer receives down payment assistance from a seller-funded program, the homebuyer must reduce the cost basis of the home because the down payment assistance represents a rebate or reduction in the purchase price thus lowering the homebuyer¡¯s cost basis under Internal Revenue Code section 1012.