Home Buyers Credit
Qualification
Period :
First-time home buyers who
bought after January 1, 2009 and before April 1 2010 (with closing to take place before
July 1 2010), would get the $8,000 home buyer tax credit. For the purposes of claiming the
tax credit, the purchase date is the date when closing occurs and the title to the
property transfers to the home owner. If you and your spouse
claim the credit on a joint return (both of you must meet the income and past ownership
criteria to qualify), each spouse is treated as having been allowed half of the credit for
purposes of repaying the credit. So the total amount claimable is still only $8000 (up to
April 30th 2010).
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Income qualification
limits: The home buyers’ credit would be available to individuals
with a modified adjusted gross income (MAGI) of up to $125,000, or $250,000 for couples,
up from
$75,000 for individuals and $150,000 for couples under the original rules. The higher
income limits are
only for homes purchased after Nov. 6, 2009. That is, the existing MAGI
phase-outs of $75,000 to $95,000 or $150,000 to $170,000 for joint filers still apply to
purchases on or before Nov. 6, 2009. Those with incomes higher than the above limits do
not qualify for any part of the tax credit.
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*NEW*
Current Homeowners
looking for a replacement primary residence could also qualify for a $6,500 (up to
$3,250 for a married individual filing separately) under the new “long-time
resident” provision. They must have lived in the same principal residence for any
five-consecutive year period during the eight-year period that ended on the date the
replacement home is purchased. This new provision also only applies to homes purchased
after Nov. 6th 2009. The IRS has stepped up compliance checks involving the home buyer
credit for those with past homes and they must provide a mortgage Interest Statement,
Property tax records or Homeowner’s insurance records, to prove compliance with past
residency criteria.
- Claiming the new
home buyer credit: For qualifying purchases, taxpayers have the option of
claiming the credit on either their 2009 or 2010 return. A new version of Form 5405,
First-Time Home buyer Credit, is now available on the IRS website. Taxpayers claiming the
credit on their 2009 returns, will not be able
to file electronically because of the added documentation requirements, but instead will
need to file a paper return by using the new version of Form 5405. A taxpayer who
purchased a home on or before Nov. 6 and chooses to claim the credit on an original or
amended 2008 return may continue to use the current version of Form 5405.
In
addition to filling out a Form 5405, all eligible home buyers must include with their 2009 tax returns one of the
following documents in order to receive the credit:
- A
copy of the settlement statement showing all parties' names and signatures, property
address, sales price, and date of purchase. Normally, this is the properly executed Form
HUD-1, Settlement Statement.
- For
mobile home purchasers who are unable to get a settlement statement, a copy of the
executed retail sales contract showing all parties' names and signatures, property
address, purchase price and date of purchase.
- For a
newly constructed home where a settlement statement is not available, a copy of the
certificate of occupancy showing the owner’s name, property address and date of the
certificate.
The
IRS expects to start processing 2009 tax returns
claiming the home buyer credit in mid-February after it completes the updating and testing
of systems to meet the law’s new requirements and to deter fraud related to the home
buyer credit. Normally,
it takes about four
to eight weeks to get a refund claimed on a complete and accurate paper
return where all required documents are attached. For those homebuyers filing early, the
IRS expects the first refunds based on the homebuyer credit will be issued toward the end
of March.
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The new $8000 credit can be used towards the down payment of a
house bought in the credit qualifying period. You need to work with your lender to take
advantage of this provision.
- Tax Credit
Exclusions: Homes that cost more than $800,000
aren’t eligible for the credit and you must be over 18 years old to claim the credit
(dependents are not eligible to claim the credit either). Those who sell their new home or
stop using it as their main residence within three years would have to repay the credit.
You cannot claim the credit if acquired your home by gift or inheritance OR if you
acquired your home from a related person
-
If two or more unmarried
individuals buy a main home, they can allocate the credit among the
individual owners using any reasonable method. The total amount allocated cannot exceed
the smaller of $8,000 or 10% of the purchase price. Note: A reasonable
method is any method that does not allocate all or a part of the credit to a co-owner who
is not eligible to claim that part of the credit (I would go with 50/50 as a
reasonable method if one person is not eligible for the credit)
- The purchase date is how you decide which credit you are eligible for. Only homes
purchased from Jan 1 2009 to April 1st 2010 are eligible for the fully refundable $8000
credit. If you constructed your main home, you are treated as having purchased it on the
date you first occupied it.
- Foreign
or Overseas Homes: You are considered a first time home buyer when buying an
American residence, even if you owned principal residence outside of the United States
within the previous three years. Non-resident alien's cannot claim the credit.
-
Members of the Armed Forces
and certain federal employees serving outside the U.S. have an extra year to buy a
principal residence in the U.S. and still qualify for the credit. An eligible taxpayer
must buy or enter into a binding contract to buy a home by April 30, 2011, and settle on
the purchase by June 30, 2011.
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