Homebuyer Tax Credit Deadline Extended

It's almost official according to all the news sources. President Obama just has to sign the bill.

For Team Patereau, this bill doesn't have any impact. All of our homebuyers who qualified closed before June 30th.

Federal Tax Credit Information

It’s almost April ...
Do You Know Where Your Tax Credit Is?

By Gino Blefari , President and CEO, Intero Real Estate Services, Inc.

Over the course of the last year or so, I’ve written a lot about the Homebuyer Tax Credit. There are some faint rumblings among lobbyists and in Congress about whether it’s going to be extended yet again (I’m betting that it won’t), but for those who are already eligible, how exactly to claim the credit isn’t exactly ... straightforward.

For one thing, there are two different credits with which to be concerned: the original First-Time Homebuyer Tax Credit, and the extended Homebuyer Tax Credit. Each has different rules, each has its own set of quirks and foibles.

First, let’s recap who’s eligible to claim the credits in the first place.

If you purchased a home between January 1, 2009 and November 6, 2009, you may be eligible for the Homebuyer Tax Credit, as it originally stood.

To qualify, you (the buyer) must not have owned a home for three years prior to your purchase. Your new home must be your primary residence, meaning you can’t use it for a vacation home or an investment property -- you actually have to live there. The maximum allowable credit is equal to 10% of the purchase price, up to $8,000. Single buyers with incomes up to $75,000 per year or married couples with incomes of up to $150,000 are eligible.

That’s pretty clear. When it comes to the extended tax credit, things are a bit hazier.

If you purchased (or if you intend to purchase) a home between November 7, 2009 and April 30, 2010, you may qualify for the extended Homebuyer Tax Credit.

If you are a first-time homebuyer (meaning that you hadn’t owned home for at least three years prior to your purchase) OR a current homeowner who had lived in a house as a primary residence for five years in a row out of the last eight, you may qualify.

For first-time homebuyers, the maximum allowable credit is $8000. For current homeowners, the maximum credit is $6,500. As with the original credit, the buyer’s eligibility depends on the price of the home (this may not exceed $800,000) and his income. For the extended credit, income levels were increased to $125,000 for single buyers and to $225,000 for married couples. Even if your income exceeds these levels, check with your tax professional to see if you might qualify for a portion of the credit.

As long as there is a contract to purchase in place prior to April 30, 2010, and so long as that transaction is closed before July 1, 2010, buyers can claim the credit on their 2009 income tax returns.

In all cases, buyers will need IRS Form 5405, as well as a fully-executed HUD-1 statement from the property closing.

As always, be sure to consult your tax professional for any questions that you may have on matters such as these. The tax credit won’t be around forever; be sure to take advantage if you’re able!

Important Information About the First-Time Homebuyer Credit

Team Patereau was discussing what can and can't be done with the First-Time Homebuyer Credit that came out of the Obama bailout plan. I said that our client can close on their first-time contract before June 30, 2010, and claim the credit on their 2009 tax return. The other half of Team Patereau said that wasn't the case. So, I looked it up at the IRS website, and sure enough, you can! There's plenty of other rules, but here's the key points, and you can and should discuss these with your tax preparer. One reminder, you can't e-file if you add this form to your mix. What the heck is that about?

1. You must buy – or enter into a binding contract to buy a principal residence – on or before April 30, 2010.
2. If you enter into a binding contract by April 30, 2010 you must close on the home on or before June 30, 2010.
3. For qualifying purchases in 2010, you will have the option of claiming the credit on either your 2009 or 2010 return.
4. A long-time resident of the same home can now qualify for a reduced credit. You can qualify for the credit if you’ve lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the new home is purchased and the settlement date is after November 6, 2009.
5. The maximum credit for long-time residents is $6,500. However, married individuals filing separately are limited to $3,250. The maximum credit for first-time homeowners is $8,000 (up to $4,000 for married filing separately).
6. People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after November 6, 2009. The full credit is available to taxpayers with modified adjusted gross incomes up to $125,000, or $225,000 for joint filers.
7. The IRS will issue a revised Form 5405 to claim this credit on 2009 tax returns. The revised form must be used for homes purchased after November 6, 2009 – whether the credit is claimed for 2008 or for 2009 – and for all home purchases that are claimed on 2009 returns.
8. Homebuyers who claim the credit on their 2009 tax return will not be able to file electronically but instead will need to file a paper return. For homes purchased in 2009 there is an option to take the credit on an original or amended 2008 tax return.
9. The new law includes documentation requirements. See revised Form 5405 for details.
10. No credit is available if the purchase price of the home exceeds $800,000.
11. The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement.
12. A dependent is not eligible to claim the credit.

IRS encourages all eligible homebuyers to take advantage of the First-Time Homebuyer Credit but at the same time cautions taxpayers to avoid schemes that help ineligible people file false claims for the credit. Visit IRS.gov/recovery for more details on the First-Time Homebuyer Credit. Forms are available on www.irs.gov or by calling the IRS at 1-800-829-3676.