Helpful information on Home Buyer Tax Credits
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hiHere are some helpful things the IRS wants you to know about the credits.
• The credits are available only to buyers purchasing primary residences. The IRS defines this has the residence where you spend most of your time.
• There are two credits available. One is for first-time buyers, or those who have not owned a home in the past three years. The maximum for this credit is $8,000 and, unlike a previous credit, this one does not have to be paid back. It applies to purchases made this year between Jan. 1 and April 30.
• The government broadened the credit in November to include some buyers who already own houses. Those buyers are eligible for a credit worth up to $6,500 for purchases made between Nov. 7 and April 30. In order to qualify, the buyer must have owned a primary residence for at least five consecutive years out of the past eight years. This credit also does not need to be paid back.
• There are income and price requirements. If the home was purchased after Nov. 6, it can cost no more than $800,000. Also, if purchased after that date, individuals cannot earn more than $125,000 and married couples filing jointly cannot earn more than $225,000.
• You don’t have to wait until 2010 to claim your credit, even if you buy this year. Purchase a home before the April 30 deadline and the credit can be claimed on this year’s taxes.
• If you’re claiming the credit, a paper filing is necessary. Only taxpayers not claiming the credit can file electronically. Dobzinski said buyers can still use electronic forms, but must print them out and mail them in, along with form 5405.
• Unlike last year, buyers claiming the credit must prove they are eligible. This is because some people filed for the credit last year, even though they had not purchased a home. You’ll need to send the HUD settlement statement along with the tax form. If you’re claiming the longtime owner credit, also include proof, such as copies of mortgage interest statements, property tax records or homeowner’s insurance records.
• Keep in mind that the credit is for your primary home. If you decide to rent or sell the home within three years, the credit must be repaid.
• Buyers claiming the credit will have to wait longer than usual to get the credit because of the need to file by paper. Expect to wait four to eight weeks, instead of the typical two weeks when filing electronically.