First Time Homebuyer Tax Credit

UPDATE: Homebuyer Credit Deadline Extended!

The deadline to close on the purchase of a home and still qualify for the First-Time Homebuyer Tax Credit has been extended from June 30, 2010 to September 30, 2010. As long as you entered into a binding contract by April 30, 2010, you now have until the end of September to reach settlement and still claim the tax credit.

First-Time Homebuyer AND Current Homeowner Tax Credit

If you bought (or still plan to buy) a home in 2009 or 2010, you should know about the First-Time Homebuyer Tax Credit. Even if you already know about the credit, you might not be aware of the recent changes made to it by the American Recovery and Reinvestment Act of 2009, or the expanded benefits added to it by the Worker, Homeownership and Business Assistance Act of 2009:

• Unlike the 2008 first-time homebuyer credit, this credit need not be repaid as long you own your house for at least three years and it remains your primary residence during that time.
• The First-Time Homebuyer Credit will now allow taxpayers a credit of up to $8,000.
• The full amount of the credit is refundable, which means that you will see it in your tax refund if you owed the IRS less than the amount of the credit.

Claiming this credit does not necessarily disqualify you from claiming another homebuyer credit (for example, the Mortgage Interest Credit). You may be able to claim multiple such credits on your home purchase. Learn more about tax deductions and credits for homeowners.

Listen to information about First-Time Home Buyer Credits

Are You Eligible for the 1st Time Homebuyer Tax Credit?

• Even if the home you purchased this year wasn’t your first, you may still be eligible to claim the credit. Homebuyers who have not owned a primary residence for three years leading up to the date of purchase qualify for this credit. For married couples, this restriction applies to both spouses.
• To be eligible for the credit, you must enter into a contract to buy your home on or before April 30, 2010 and you must close the sale by September 30, 2010.
• For purchases made on or before November 6, 2009, the credit begins to phase out for taxpayers whose modified adjusted gross income is greater than $75,000 for single filers ($150,000 for married filing jointly). The credit phases out entirely at $95,000 ($170,000 married filing jointly).
• For purchases made after November 6, 2009, the credit begins to phase out at modified adjusted gross incomes of greater than $125,000 for single filers ($225,000 married filing jointly) and phases out completely at $145,000 ($245,000 married filing jointly).
• The credit may be claimed only on a primary residence.
• Even if you owe no tax, or if the credit exceeds what you owe, you will still receive the credit if you are eligible.

Click here for common questions and answers about the First Time Homebuyer Tax Credit.

Claiming the Homebuyer Tax Credit

• If you purchased in 2009, you may choose between claiming the homebuyer tax credit on your 2008 or 2009 return.
• If you purchased (or will purchase) in 2010, you will have the option of claiming the credit on your 2009 or 2010 return.
• If you purchased in 2008, you may file an amendment to your 2008 Tax Return allowing you to claim the credit.
• How do you choose in which year to claim the homebuyer tax credit? If your income is lower in 2009 than it was in 2008, you might qualify for a higher credit in 2009. In that case it could be worth it to wait until early 2010, when you file your 2009 return, to claim the credit.
• During your tax preparation on efile.com the eFile tax preparation software will generate the correct tax form for you and let you print the form with your tax return.

New Extended 2009 Homebuyer Credit for Long-Time Homeowners

Changes made in November, 2009, to the Homebuyer Credit by the Worker, Homeownership, and Business Assistance Act of 2009 have made the credit available to a much wider range of taxpayers. Now, for the first time, long-time homeowners will be able to claim a New Homebuyer Credit.

If you have previously owned a home for at least 5 consecutive years (in the 8-year period which ends on the day you purchase your new home), and used it as your primary residence, you may qualify for a tax credit of up to $6,500. The income phaseouts and other eligibility requirements for this credit are the same as those described above for the First Time Homebuyer Credit.

For Homes Purchased After November 6, 2009...

Several new restrictions apply to the credit for homes purchased after November 6, 2009:

• You (or your spouse) must be at least 18 years old on the date of the purchase.
• You may not be claimed as a dependent on another's tax return.
• The purchase price of your home must not exceed $800,000.
• You must attach a properly executed settlement statement to your tax return.
• Your application for the credit may be denied on the basis of a "math error", without the IRS having to conduct a full audit.

If You Purchased a Home in 2008…

Taxpayers who purchased their first homes between April 8, 2008 and January 1, 2008 may be eligible for a different tax credit of up to $7,500, to be paid back interest-free in 15 equal yearly installments. If you didn’t claim this credit on your 2008 tax return but think you might be eligible for it, you can file an amendment. You can also file an amendment if you purchased a home in early 2009 and claimed the credit on your 2008 returns but now want to take advantage of the 2009 credit instead.

Can I Use eFile if I Claim the Credit?

Yes, but because of the late passage of the expanded Homebuyer Credit legislation, the IRS cannot accept electronically filed (efiled) 2009 Tax Returns which claim the credit. However, you may still take advantage of the eFile tax software to easily prepare your tax return and print it for no additional charge. You can then mail the paper copy to the IRS. Be sure to include Form 5405, First-Time Homebuyer Credit, but don't worry; the efile.com tax software will select the correct form for you.

If your new home was purchased after November 6, 2009, you must also include a paper copy of the settlement statement with your tax return. This is generally a Form HUD-1 which shows all parties' names and signatures, the address of the property, the final sales price, and the official date of purchase.

If your new home was newly constructed and a settlement statement is not available, you must include a copy of the certificate of occupancy showing the owner’s name, the address of the property, and the certificate's date.

If your new home is a mobile home and a settlement statement is not available, you must include a copy of the retail sales contract showing all parties' names and signatures, the current address of the property, the purchase price, and the date of purchase.

If you are a long-time homeowner you must prove that you occupied a prior home for at least a 5 year period in the last 8 years. The IRS recommends that you include with your return at least one of the following: property tax records, homeowner's insurance records, and/or a Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements.

Note on Documentation Requirements for the First-Time Homebuyer Credit:

The IRS requires that those new homebuyers who purchased their home after November 6, 2009, attach a copy of their settlement statement to their 2009 Tax Return. Normally, the signatures of both the buyer and seller are required, but the IRS will accept settlement statements that are in compliance with local laws (e.g. in cases where there is not a signature line for both parties). Nonetheless, the IRS encourages homebuyers to sign their settlement statements, even if there is no seller's signature or if there are no lines for signatures at all.

Will The First-Time Homebuyer Credit Delay My Refund?

Unfortunately, yes. The IRS will not begin processing tax returns which claim the First-Time Homebuyer Credit until late February, 2010, and the first refunds will not be issued until March. Even if you file in February or later, be prepared to wait an extra 2-3 weeks for your tax refund.

Read more details on the First-Time Homebuyer Tax Credit.