This article was last updated on January 12
[Update] See this post for the home buyer credit extension
A report released today by the National Association of Realtors shows home sales are up eight-percent, the single-biggest monthly rise since October 2001. The reason? – The first-time home buyer tax credit. Nationwide, the tax incentive has been a huge boost, helping to sell more than 900,000 homes. The credit is expiring April 30 2010, but home buyers can still qualify for the $8,000 (new buyers) or $6500 (existing home owners) credit up to June 30 2010, as long as they have their home under contract by April 30th. The credit may be claimed on 2009 taxes, even if the return was already filed. Just submit an amended return. Note that buyers get the full amount of the credit they’re due even if that exceeds the amount of taxes they owe. If you’re a first-time buyer and your total tax bill for the year is $6,000, you get all that back plus another $2,000. You can see more on this credit’s history and other qualification details in earlier articles
[Update] The IRS brings us some key information and tips related to qualifying for and claiming the Home Buyer credit.
- You must buy – or enter into a binding contract to buy – a principal residence located in the United States on or before April 30, 2010. If you enter into a binding contract by April 30, 2010, you must close on the home on or before June 30, 2010.
- To be considered a first-time homebuyer, you and your spouse – if you are married – must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.
- To be considered a long-time resident homebuyer, you and your spouse – if you are married – must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased. Additionally, your settlement date must be after November 6, 2009.
- The maximum credit for a first-time homebuyer is $8,000. The maximum credit for a long-time resident homebuyer is $6,500.
- You must file a paper return and attach Form 5405, First-Time Homebuyer Credit and Repayment of the Credit with additional documents to verify the purchase. Though you cannot file electronically, you can still use IRS Free File or tax-preparation software to prepare your return. The return must then be printed out and sent to the IRS, along with all required documentation.
- If before May 1, 2010, you enter into a binding contract to purchase a home before July 1, 2010, and you are claiming the credit, attach a copy of the pages from the signed binding contract to make a purchase showing all parties’ names and signatures, the property address, the purchase price and the date of the contract.
- New home buyers must attach a copy of a properly executed settlement statement used to complete such purchase. Generally, a properly executed settlement statement shows all parties’ names and signatures, property address, sales price and date of purchase. However, settlement documents, including the Form HUD-1, can vary from one location to another and may not include the signatures of both the buyer and seller. In areas where signatures are not required on the settlement document, the IRS encourages buyers to sign the settlement statement when they file their tax return — even in cases where the settlement form does not include a signature line.
- Buyers of a newly constructed home, where a settlement statement is not available, must attach a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.
- Purchasers of mobile homes who are unable to get a settlement statement must attach a copy of the executed retail sales contract showing all parties’ names and signatures, property address, purchase price and date of purchase.
- If you are a long-time resident claiming the credit, the IRS recommends that you also attach documentation covering the five-consecutive-year period such as Form 1098, Mortgage Interest Statement or substitute mortgage interest statements, property tax records or homeowner’s insurance records.