The Homebuyer Tax Credit And Revised Form 5404
There are two types of homebuyer tax credits.
For first time homebuyers up to a $8,000 tax credit is availabe and for repeat homebuyers replacing there primary residence an amount up to $6,500 tax credit is available. The credit is equal to 10% of purchase price of the new or replacement home.
Homebuyer Tax Credit Extension
The Worker, Homeownership and Business Assistance Act of 2009 was signed by President Obama on November 6, 2009. This legislation extended a homebuyers tax credit to April 30, 2010 and June 30, 2010 for closings and as a consequence revised Form 5405. Form 5405 was revised to include the changes to the tax credit and must be used to receive the credit for home purchases after November 6, 2009 and prior to the extended deadline. The revisions also extended the deadline for the armed forces, diplomats and intelligence personel in service in foreign countries an extra year.
Those who purchase a home between January 1, 2010 and close by June 30, 2010 can claim their credit on their 2009 or 2010 tax return. The added documentation requirements make it necessary for the taxpayer seeking the credit to file a paper tax return. IRS Free File can still be used to prepare returns but the returns must be printed and sent in.
First Time Homebuyers and Repeat Homebuyers
In addition to completing Form 5405 eligible homebuyers (1st time and existing) will have to include one of the following:
- copy of the settlement statement
- for mobile homes with no settlement statement must show copy of executed retail sales contract.
- for new homes with no available settlement statement must show copy of certificate of occupancy.
Are you buying a home? Check out these great tips for homebuyers.
A credit up to $6,500 is available to current homeowners who have owned their principal residence for at least 5 consective years out of the last eight and who intend to replace their principal residence with the newly purchased home. This tax credit has been extended to April 30, 2010 with a closing deadline of June 30, 2010. To be eligible for the credit the taxpayer must attach documentation proving residence during the five-consecutive-year period with any of the following documents:
-Form 1098, Mortgage Interest Statement or substitute mortgage interest statements
- property tax records
- homeowner's insurance records
After filing it may take 4-8 weeks or 2-3 weeks longer than it usually takes to receive your tax return. If eligible the tax credit is fully refundable which means that the credit is payed out whether or not the taxpayer owes taxes or is already due a refund. Happy house hunting.