Many of you have asked me about how the new and now expanded Home Buyer Tax Credit works. I put together this blog post to clear things up:
On November 6, 2009 the new home buyer tax credit was passed. Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy, a primary 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 home buyer tax credit law in a nutshell:
- Authorizes the $8,000 or 10% of the purchase price which ever is less tax credit for first-time homeowners buying a primary residence.
- Authorizes the $6,500 or 10% of the purchase price which ever is less tax credit for long-time homeowners buying a primary residence.
- Raises the income limitations for homeowners claiming the credit. The credit begins to phase out for taxpayers whose modified adjusted gross income is more than $75,000, or $150,000 for joint filers.
- 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.
- Homebuyer must own the home as a primary residence for more than three years following the purchase date.
- 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.
How to file for the credit:
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. But, if the closing occurs after April 15, 2009, a taxpayer can still claim it on a 2008 tax return by requesting an extension of time to file or by filing an amended return. The credit is claimed using Form 5405, which you file with your original or amended tax return.
For more information see your Tax Professional or visit the IRS website.
