You can claim the credit if you are a first-time homebuyer and have purchased a home located in the United States after April 8, 2008 and before June 30, 2010. For the purpose of this credit, you are first time homebuyer if you (your spouse if married) did not own any other main home during the 3-year period ending on the date of purchase. Vacation homes and rental property are not eligible. The date of purchase is the date the title closes. If you constructed your main home, the purchase date is the first date you occupy the home. Different credit applies to home located in the United States purchased during
(a) After April 8, 2008, and before January 1, 2009, and
(b) After December 31, 2008 and before December 1, 2009. Under the new law, was signed into law on Nov. 6, 2009, 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.
Taxpayers will claim the credit on IRS Form 5405, First-Time Homebuyer Credit. You claim the first-time homebuyer credit on your 2008 tax return or amended 2008 return or on your 2009 return. If you are claiming the credit on the amended tax return Form 1040X, then enter the credit on line 15 of Form 1040-X and enter "Form 5405" in the white space at the end of line 15, and attach the Form 5405.
How much is the credit?
(a) For home purchases after April 8, 2008, and before January 1, 2009
The credit is 10 percent of the purchase price of the home, with a maximum available credit of $7,500 for either a single taxpayer or a married couple filing jointly. The limit is $3,750 for a married person filing a separate return. In most cases, the maximum credit will be available for homes costing $75,000 or more.
The credit is in fact an interest-free loan because it must be repaid in equal installments over a 15-year period starting the second year after the year the credit is claimed. For example, if you properly claim the maximum available credit of $7,500 on your 2008 federal tax return, you must begin repaying the credit by including one-fifteenth of this amount, or $500, as an additional tax on your 2010 federal tax return. Normally, $500 will be due each year from 2010 to 2024.
The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers and the credit phases out at $95,000, or $170,000 for joint files. Also no credit is allowed if the taxpayer disposes of the residence, or the residence ceases to be principal residence, before the close of the tax year for which credit is otherwise allowed.
What if you sell your home?
When you sell the home or do not use the home as principal residence, you must pay back the balance of the loan in the year the home is sold or ceases to be the principal residence. However, the repayment of amount may not exceed the amount of gain from the sale of residence to an unrelated person. If there is no gain then repayment is waived.
If on divorce, the home is transferred to a spouse or former spouse, the spouse who receives the home is responsible for any future recapture.
(b) For home purchases closed after December 31, 2008 and before July 1, 2010 (Binding contract for the principal residence must be entered on or before April 30, 2010)
The credit is 10 percent of the purchase price of the home, with a maximum available credit of $8,000 for either a single taxpayer or a married couple filing jointly. The limit is $4,000 for a married person filing a separate return. In most cases, the maximum credit will be available for homes costing $80,000 or more.
They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. The amount of the credit begins to phase out for taxpayers whose modified adjusted gross income (MAGI) is more than
(i) $75,000, or $150,000 for joint filers (for purchased before November 6, 2009), and
(ii) $125,000, or $225,000 for joint filers (for purchases on or after November 6, 2010).
Who Cannot Claim the Credit
1. If you are a non-resident, the home is located outside the United States, or you acquired home by gift, inheritance or from a related person. (Resident aliens even with ITIN are eligible).
2. If you own more than 50% outstanding stocks of a corporation or capital interest or profits interest of a partnership.
3. If you are or were eligible for District of Columbia first-time homebuyer credit.
4. You buy your home from a close relative. A related person includes your spouse, ancestors (parents, grandparents, etc), or linear descendants (children, grandchildren, etc.).
5. You stop using your home as your main home. You sell your home before the end of the year.
6. Your home financing comes from tax-exempt mortgage revenue bonds.
(c) Credit for long-time homeowners buying a replacement principal residence.
For the first time, long-time homeowners who buy a replacement principal residence may also claim a homebuyer credit of up to $6,500 (up to $3,250 for a married individual filing separately). 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. Replacement home must be purchased in the period from November 6, 2009 to April 30, 2010. or after April 30, 2010 and before July 1, 2010, and you entered into a binding contract before May 1, 2010 to purchase home before July 1, 2010.
Proof of Purchase
Real estate transfer records are public records. Many states make it available on line and the IRS can verify it easily. Some days do not have all the records online or public and in those cases IRS is asking for the proof of purchase. For example, most records in MO are not available on line and the IRS is asking for a copy of the recorded deed or a copy of the HUD-1 or RESPA settlement sheet as proof.
IRS Warns Taxpayers to Beware of First-Time Homebuyer Credit Fraud
IRS vigorously pursues anyone who falsely tries to claim this or any other tax credit or deduction. The penalties for tax fraud are steep. Taxpayers should be wary of anyone who promises to get them a big refund. So before claiming the credit, make sure that you meet the requirements, and claim the credit only after you actually purchase the home.
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
1. 2008 Filing Requirements
2. Filing Requirement for a Dependent
3. 2009 Filing Requirements
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
4. Filing W4 Employee’s Withholding Allowance Certificate
5. Missing W2, 1099-Misc, 1099-R, 1099-Int
6. My Tax Refund?
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
State Tax Return
1. Working in Two or More States
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