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What you should know about the First-Time Home Buyer Tax Credit
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What you should know about the EXTENDED and EXPANDED First-Time Home Buyer Tax Credit
Congress and the President have extended and expanded the $8,000 tax credit for first-time home buyers. You now have until April 30, 2010 to sign a contract and qualify.
There’s good news for existing homeowners: if you intend to sell your home and buy another in 2009 or 2010, you may be eligible for a federal tax credit of up to $6,500.
The Extended Homebuyer Tax Credit legislation, passed in November 2009, also shares the wealth with first-time homebuyers—up to $8,000.
Are you eligible?
You’re considered a current homeowner under IRS rules if you’ve used the home being sold or vacated as a principal residence for five consecutive years within the last eight. You’re a first-time homebuyer if you or your spouse haven’t owned a home for the three years before your purchase.
In both cases, keep in mind that the credit amount you’re eligible for begins to decrease for joint filers if your modified adjusted gross income is $225,000 ($125,000 for individuals); it disappears at $245,000 ($145,000 for individuals).
The ultimate amount of your credit depends on the price of the home and your income.
To claim your benefit:
Close on a new principal residence between Nov. 7, 2009, and April 30, 2010. You can settle as late as June 30, 2010, as long as you have a binding contract by April 30.
Don’t spend more than $800,000 on your new home.
When you submit your tax return, attach a copy of the settlement statement you received at closing. Check with the IRS or your tax adviser to confirm what additional documentation may be needed.
Decide whether to:
- Apply the credit to your 2009 tax return, filed on or before April 15, 2010,
- File an amended 2009 return; or
- Apply the credit on your 2010 return, filed on or before April 15, 2011.
First-timers who purchased a home between Jan. 1, 2009, and Nov. 6, 2009, may also be eligible for the $8,000. Keep in mind that the income limits in this case are tighter than for those who purchased after Nov. 6.
Apply the credit to your 2009 taxes
To claim the credit on your 2009 tax return:
- Read IRS article with complete information and instructions.
- Complete IRS Form 5405 to determine the amount of your available credit.
- Apply the credit when you file your 2009 tax return or file an amended return.
- Attach documentation of purchase to your return or amended return.
Which properties are eligible?
You can apply the credit to primary residences, including single-family homes, condos, townhomes, and co-ops.
Do I need to repay the tax credit?
No, not if you occupy the purchased home for three years or more. However, if the property is sold during this three-year period, the full amount of the credit will be recouped on the sale.
This is general information about tax laws and consequences, but it is not intended to be relied upon as tax or legal advice for particular transactions or circumstances. We urge you to consult a tax professional for such advice.
Take more than a mental picture
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- Memo Recorder
When we are looking at houses, you will spend hours looking at homes over a short period of time. To keep them all from blending into one giant blur, we continually evaluate your top three. At the end of the day, you don’t want to ask yourself, “which house had that beautifully designed great room? Was it the same one with the small master bedroom?” You can remember what is important about each of the many properties that you saw by using the little tricks developed by real estate agents to help them identify the countless properties we see.
Carry a notebook with you when you are house-hunting and give each house its own page. At the top of the page, note the address and price. Write down the exterior construction, style and color, as well as the color of the living room carpet, walls and other major features that will jog your memory later. You can give the houses nicknames like “the ski chalet house” or “babbling brook hideaway.” Use anything to help you retain a mental picture of the property.
The iPhone 3GS (and other smartphones) have built-in voice memo recorders, and that’s another way to take “notes.” You can even send the memos to another decision maker who’s not on the hunt that day.
I also recommend that you use your smartphone or other digital camera to take pics. I always carry a laser/digital measuring device, so we can measure rooms and square footages as we go too.
Doing these things will enable you to recap the day and give me important feedback that can speed up your search for the perfect home.