Sunday, February 7, 2010

How Do I Get My First Time Home Buyer's Credit?

It's getting that time of year where some of our clients... first time home buyers especially in this context... are doing their taxes and want to know about how to get the First time Home Buyer's Credit... Here's some stuff...

Both first-time home buyers and long-time owners can qualify for a credit. A first-time home buyer for the purposes of the credit is someone who has not owned a home (or whose spouse who has not owned a home) during the three-year period that ends on the date of purchase of the new home. If you purchased on November 30, 2009 you must not have owned a home since December 1, 2006. The earliest date to qualify for this credit is January 1, 2009.

To qualify for the credit given to long-time home owners, you must have owned your current home for any five five year period during the eight year period ending on the date of purchase of the new home. The earliest home purchase date to qualify for this credit is November 8, 2009.
For either credit, if your date of purchase is in May or June 2010, you will need to prove you entered into a contract to buy the house before May 2010. Read below to determine what documentation is necessary.

Members of the military and the “intelligence community” have an extra year to purchase a house and qualify for the credit.

Restrictions for qualifying for the credit

Even if you qualify as a first-time home buyer or a long-time home owner and you have purchased a qualifying house within the permitted time frame, you might still not qualify for the credit.

You will not qualify if:

You purchased your house after November 6, 2009, the price of the house may not be more than $800,000;

Your modified adjusted gross income is $95,000 ($170,000 if you are married filing jointly) or more and you purchased your house before November 7, 2009. A phase-out of the credit begins with a MAGI of $75,000 (or $150,000);

Your modified adjusted gross income is $145,00 ($245,000 if you are married filing jointly) or more and your purchased your house after November 6, 2009. A phase-out of the credit begins with a MAGI of $125,000 (or $225,000);

Someone else claims you as a dependent on their tax return;

You purchased your house after November 6, 2009, and were under the age of 18 on the date of purchase;

You are a nonresident alien;

Your house is located outside the United States;

You sell your home or it ceases to be your main residence before the end of the year in which you purchase it;

You received the house as a gift or inheritance;

You acquired your home from a relative or a related corporation or partnership;

1. You need IRS form 5405 "First Time Homebuyer Credit and Repayment of The Credit. The form will guide you through the process, ensure you qualify for a credit, and determine the amount of your credit.

2. Collect your required documentation. You will need the Form HUD-1 Settlement Statement or other settlement statement outlining the names and signatures of all parties to the sale, the property address, the price, and the date of purchase. If you do not have a settlement statement, as you might not if you purchase a newly-constructed home, attach your certificate of occupancy.

If you are under contract but have not taken occupancy of the house by the time you file your taxes — and you still qualify under the date restrictions above — include pages from your signed contract including the signatures and names of all parties, the property price, the address, and the contract date.

If you qualify as a long-time homeowner rather than a first-time home buyer, include Form 1098 (Mortgage Interest Statement), property tax records, or homeowners’ insurance records. The forms must cover a full consecutive five year period within the eight years ending on the date of the purchase. Be sure to send copies of these forms, not the originals.

3. Complete your Form 1040. Include your bottom line on Form 5405 on the appropriate line on your income tax return. On the 2009 Form 1040 return, it's line 67. If you use the Short Form or Form 1040EZ you won't be able to do this.

It may not be a bad idea to hire a professional to assist you with or to do your taxes if you are skittish about these sort of things... It is a considerable amount of money and you want to make sure you get it right! Otherwise rock on!