On November 6, 2009 The Worker, Homeownership and Business Assistance Act was signed into law. This move has resulted in the extension or expansion of the first time home buyer credit which was enacted previously. In order to receive the first time home buyers tax credit you must first understand who qualifies and how you should proceed in order to get the most benefit from the tax credit. Here we look at two frequently asked questions regarding the first time home buyer credit.
Who qualifies for the first time home buyers credit?
Anyone who is purchasing a home for the first time is eligible for the first time home buyers tax credit. By law a first time home buyer is considered a buyer who has not previously owned a primary residence in the last three years. If you own a vacation home or rental property that is not used as your principal residence you still qualify as a first time home buyer. Married couples can expect to have both histories taken into consideration, if one person owned a principal residence in the previous three year period both parties are eliminated as a first time home buyer. Anyone who has purchased a home after the November 6th extension is subject to income limits in order to qualify.
What forms are needed?
Qualifying taxpayers must submit the necessary documents in order to receive the tax credit. When filing your 2009 tax return you will need to submit the following along with your paper return (no electronic filing):
- Form 5405- First Time Home Buyer Credit and Repayment of the Credit
- Form HUD-1, Settlement statement with buyers’ names, signatures, property address, sales price and date of purchase for conventional home sales.
- Executed retail sales contract with the same information as a settlement statement if you are unable to provide the settlement statement.
- New home construction, which does not yet have a settlement statement, requires a certificate of occupancy with the owner’s name, property address and date.
Note: Form 5405 can be used for both first time home buyer tax credit or the repeat buyer tax credit.
What information is needed?
You will want to make sure you qualify for the tax credit before you file your tax return. Understand income eligibility as well as what homes qualify for the tax credit. There are a variety of requirements that have to be met based on what type of home you have purchased, your marital status and the date when the home was purchased. Depending on what year you wish to claim the tax, the requirements and eligibility may be different.
The first time home buyers tax credit applies to any first time home buyer who has purchased their home on or after January 1, 2009 until April 30, 2010. This tax credit is equal to ten percent of your homes purchase price with a maximum credit of $8,000. Home buyers who have purchased their home after November 6, 2009 are subject to the following income limits; $125,000 for individuals and $225,000 for married couples. To claim the first time home buyers tax credit you must submit Form 5405 and all other required documents with your 2009 tax return.
Due to the number of scenarios in which first time home owners find themselves, it is important to research and fully understand this tax credit in order to receive the maximum benefit. Note key dates and eligibility requirements. In addition there are also tax credits available for repeat buyers who have owned their home for five consecutive years out of the prior eight years. Anyone in the military, Foreign Service or intelligence community may be eligible for expanded tax credits.