Eight Essential Facts about Claiming the First-Time Homebuyer Credit
If you purchased a home in 2010, you may still be eligible to claim the First-Time Homebuyer Credit, whether you are a first-time homebuyer or a long-time resident purchasing a new home.
To qualify, the purchaser must have been at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement. However, someone who is a dependent is not eligible to claim the credit.
Here are eight things you need to know about claiming the credit:
1. You must have bought, or entered into a binding contract to buy, a principal residence located in the United States on or before April 30, 2010. If you entered into a binding contract by April 30, 2010, you must have closed on the home on or before September 30, 2010.
2. 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.
3. 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.
4. The maximum credit for a first-time homebuyer is $8,000, half that amount for married individuals filing separately. The maximum credit for a long-time resident homebuyer is $6,500. Married individuals filing separately are limited to $3,250.
5. 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. Therefore, if you claim the credit you will not be able to file electronically.
6. New homebuyers must attach a copy of a properly executed settlement statement used to complete the purchase. Buyers of a newly constructed home, where a settlement statement is not available, must attach a copy of the dated certificate of occupancy. Manufactured home purchasers who are unable to get a settlement statement must attach a copy of the retail sales contract.
7. If you are a long-time resident claiming the credit, you also should attach additional documentation covering the five-consecutive-year period, including Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements, property tax records or homeowner's insurance records. This helps prove that you lived in the former home the requisite period of time.
8. Members of the military and certain other federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the credit.
Now, if you have already filed your tax return for 2010 and you find you qualify for the homebuyer credit, it's not too late claim the credit!
You can simply file an amended tax return, using Form 1040X, claim the credit, and potentially receive a substantial refund. And, contrary to popular myth, filing an amended return IS NOT a red flag to the IRS that will land you in the middle of an IRS audit.
For more information about these rules including details about documentation and other eligibility requirements for the First-Time Homebuyer Tax Credit, consult your tax professional or visit www.irs.gov/recovery.
