If you purchased a home in 2009, you might be eligible for a tax credit of up to $8000.
There’s a tax credit for first-time home buyers and another that primarily benefits home buyers who owned a home before. But do not mix it up with the first-time homebuyer tax credit in 2008, which actually was a long-term loan.
There are maximum income levels and maximum sales prices... vacation homes or rental property will not qualify.
Q. What is the purpose of the tax credit?
A. Congress passed the tax credits in an effort to fight recession and boost the struggling housing industry. Indications are that it has made an impact. NAR (National Association of Realtors) reported that November sales of existing homes were up 44% from a year earlier.
Q. How many people are claiming the credit?
A. 4.4 million households are expected to claim the tax credit before it expires
Q. How many versions are there?
A. 3
1.) The 1st tax credit for first-time homebuyers was really a long term interest free loan that has to be paid back over 15 years. The max credit was $7,500 for a primary home purchased between 4/9/08 and 6/30/09.
2.) The 2nd version made the first-time homebuyers credit a true credit and it doesn’t have to be paid back! The maximum amount was raised to $8,000 and applys to homes purchased between 1/1/09 and 11/30/09.
3.) The 3rd change extended the eligibility dates to homes purchased through 4/30/10 and also added a credit for long time home owners who purchased a new residence between 11/7/09 and 4/30/10, but at a reduced value only up to $6,500.
Q. Do I automatically qualify if I purchased a house during those periods?
A. No. To qualify, the house has to be used as a primary residence. If purchased after 11/6/09, it cannot have cost more than $800K. If you’re a long time homeowner, you had to have lived in the same house consecutively for 5 out of the last 8 years, though you need not have lived in or owned that house at the time you buy a new home.
For homes purchased after 11/6/2009, the credit also begins phasing out for individuals with modified adjusted gross incomes above $125K, and for married couples filing jointly with incomes above $225K.
Q. What defines a principal (primary) residence?
A. Your main home is the one you live in most of the time and can be a house, houseboat, mobile home, co-operative apartment or condo.
Q. If I’m living overseas, can I buy a home there?
A. The home will not qualify unless it is in the US.
Q. How can I claim the credit?
A. Fill out IRS form 5405. You’ll also have to submit a copy of your settlement statement (HUD-1) with the names and signatures of all parties, the property address, the sales price and date of purchase.
To avoid refund delays provide documents to show you meet the requirement for consecutive years lived in your old house. This can include mortgage interest statements, property tax or homeowner’s insurance records.
Q. Do I have to wait until I file my 2010 taxes to claim the credit for a home purchased before the deadline in 2010?
A. No, you can claim the credit on your 2009 return for a home you bought in 2010 that qualifies for the credit.
Q. I purchased my home in 2008 and filed for a credit on my tax returns. Do I still have to pay it back?
A. Yes. When Congress did away with the repayment requirement, it did not do so retroactively.
Q. Can I purchase the property for business?
A. You are not eligible because the house must be used as a primary residence to qualify.
Q. Can I keep my original house and use it as a rental property?
A. If you qualify for the credit as a long time homeowner, you are not required to sell the original house.
However, you must make the new one your primary residence.
Q. If I decide to sell the house I got the credit for or convert it to a rental property, what will happen?
A. You will then have to pay back the credit if you don’t keep the purchased house as your primary residence for 3 years.
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