$8000 tax Credit - Good Things
to Know
Legislative changes in November 2009 expanded and
extended the credit and also added documentation requirements for claiming
the credit. Due to increased compliance checks by the IRS, failure to submit
documentation will slow down the issuance of any applicable refund.
Filing Requirements
2009 Tax Return
Because of the documentation requirements for
claiming the credit, taxpayers who claim the credit on their 2009 tax return
must file a paper — not electronic — return and attach Form
5405, First-Time Homebuyer Credit and
Repayment of the Credit (see the
instructions for help with the form), and a
properly executed copy of a settlement statement used to complete the
purchase.
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Purchasers of conventional homes should include a copy of Form HUD-1,
Settlement Statement, or other settlement statement, showing all
parties' names, property address, sales price and date of purchase.
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Purchasers of mobile homes who are unable to get a settlement statement
should include a copy of the executed retail sales contract showing all
parties' names, property address, purchase price and date of purchase.
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Purchasers of newly constructed homes where a settlement statement is
not available should include a copy of the certificate of occupancy
showing the owner’s name, property address and date of the certificate.
Note Regarding Signatures: While
the Form 5405 instructions indicate that a properly executed settlement
statement should show the signatures of all parties, the IRS recognizes that
the elements of the settlement document, often a Form HUD-1, may vary from
jurisdiction to jurisdiction and may not reflect the signatures of the buyer
and seller. The settlement statement that must be attached to the return is
considered to be properly executed if it is complete and valid according to
local law. In locations where signatures are not required the IRS encourages
the buyer to sign the settlement statement prior to attaching it to the tax
return even in cases where the settlement form does not include a signature
line.
Long-Time Residents: The November
2009 legislation extends the credit to long-time residents of the same main
home if they purchase a new main home. To qualify, eligible taxpayers must
show that they lived in their old homes for a five-consecutive-year period
during the eight-year period ending on the purchase date of the new home.
For long-time residents claiming the credit, the IRS recommends attaching,
in addition to the documents described above, any of the
following documentation of the five-consecutive-year period:
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Form
1098, Mortgage Interest Statement, or substitute mortgage interest
statements,
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Property tax records or
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Homeowner’s insurance records.
2008 Tax Return
It is still possible to claim the homebuyer credit
for 2009 home purchases on 2008 tax returns. Homebuyers may use the
December 2009 revision of the Form 5405
along with
Form 1040X to amend
their 2008 tax return.
Homebuyer Credit
Expanded and Extended
The Worker, Homeownership and Business Assistance
Act of 2009, signed into law on Nov. 6, 2009, extends and expands the
first-time homebuyer credit allowed by previous Acts.
Under the new law,
an eligible taxpayer must buy, or enter
into a binding contract to buy, a principal residence on or before April 30,
2010 and close on the home by June 30, 2010. For qualifying purchases in
2010, taxpayers have the option of claiming the credit on either their 2009
or 2010 return.
The new law also:
News release 2009-108 has
the details, as do two new IRS videos in
English and
Spanish.
Members of the military, Foreign Service and
intelligence community serving outside the U.S. should also be aware of new
benefits in the law that apply particularly
to them.
Following is general information for first-time
homebuyers who settled on a new home on or before Nov. 6, 2009.
For 2008 Home
Purchases
The Housing and Economic Recovery Act of 2008
established a tax credit for first-time homebuyers that can be worth up to
$7,500.
For homes purchased in 2008, the credit is similar to
a no-interest loan and must be repaid in 15
equal, annual installments beginning with the 2010 income tax year.
For 2009 Home
Purchases
The American Recovery and Reinvestment Act of 2009
expanded the first-time homebuyer credit by
increasing the credit amount to $8,000
for purchases made in 2009 before Dec. 1. However, the new Worker,
Homeownership and Business Assistance Act of 2009 has extended the deadline.
Now, taxpayers who have a binding contract to purchase a home before May 1,
2010, are eligible for the credit. Buyers must close on the home before July
1, 2010. [Added Nov. 12, 2009]
For home purchased in 2009, the credit does not
have to be paid back unless the home ceases to be the taxpayer's main
residence within a three-year period following the purchase.
First-time homebuyers who purchase a home in 2009
can claim the credit on either a 2008 tax return, due April 15, 2009, or a
2009 tax return, due April 15, 2010. The credit may not be claimed before
the closing date.
News release 2009-27 has more information on these
options.
General Information
Homebuyers who purchased a home in 2008, 2009 or
2010 may be able to take advantage of the first-time homebuyer credit. The
credit:
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Applies
only to homes used as a taxpayer's principal residence.
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Reduces
a taxpayer's tax bill or increases his or her refund, dollar for dollar.
-
Is
fully refundable, meaning the credit will be paid out to eligible
taxpayers, even if they owe no tax or the credit is more than the tax
owed.
Questions and Answers
More information is available in the
question and answer section.
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