The new tax credit for first-time home buyers
Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home before Dec. 1 receive up to $8,000, or $4,000 for married individuals filing separately. People can claim the credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.
According to the IRS, there are a few filing options to consider. Taxpayers who haven’t yet filed their 2008 returns but are buying a home soon can request a six-month extension to Oct. 15, which has already passed. This step would be faster than waiting until next year to claim it on the 2009 tax return. Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit.
Or, you can file now, amend later. Taxpayers due a sizable refund for their 2008 tax return but who also are considering buying a house in the next few months can file their return now and claim the credit later. Taxpayers would file their 2008 tax forms as usual, and then follow up with an amended return later this year to claim the homebuyer credit.
Another option is to amend the 2008 tax return. Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return.
Finally, you can claim the credit in 2009 rather than 2008. For some taxpayers, it may make more financial sense to wait and claim the homebuyer credit next year when they file the 2009 tax return rather than claiming it now on the 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.
The IRS reminds taxpayers the amount of 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 can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.
The Worker, Homeownership, and Business Assistance Act of 2009 has established a tax credit of up to $6,500 for qualified move-up/repeat home buyers (existing home owners) purchasing a principal residence after Nov. 6, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010).
By definition, a tax credit qualified move-up home buyer is a home owner who has owned and resided in a home for at least five consecutive years of the eight (8) years prior to the purchase date. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. Repeat home buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit.
The income limits for claiming the tax credit are $125,000 for single taxpayers and $225,000 for married taxpayers filing a joint return. If you recall, the previous tax credits applied only to first-time home buyers and were for different amounts of money.
To claim the tax credit on your federal income tax return you should complete IRS Form 5405 to determine the tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns). Home buyers must attach a copy of their HUD-1 settlement form to Form 5405 as proof of the completed home purchase. Any home that will be used as a principal residence will qualify for the credit, provided the home is purchased for a price less than or equal to $800,000.
The foregoing is not intended to be tax advice, and you should consult with a tax advisor or accountant for any questions regarding the tax credit.
Mario D’Artagnan is a broker associate with The Jim Fischer Team at Gulf Coast Realty Network, Inc. He is a former Florida Real Estate Commission investigator, a former real estate instructor, and a published author. He is also a U.S. Air Force veteran. For more information, contact D’Artagnan at: mariodartagnan@yahoo.com, or call 239-565-4445.