If you bought your first home between Jan 1 and Apr 30, 2010 you can claim the First-Time Homebuyer Credit for 10% of the cost of the house, up to a
maximum of $8,000.
NOTE: Credits are better than Deductions. Credits reduce your taxes dollar-for-dollar, regardless of what tax bracket you are in.
Singles with income up to $125,000 get full credit -- partial credit if you made up to $145,000.
Married couples with income up to $225,000 get full credit – partial credit if they made up to $245,000.
What if You are Not a FIRST-time Homebuyer, but got a New Home?
Former or current homeowners who closed on a new home by Sep 30, 2010,
and who lived in a principal residence for at least five of the past eight years
before buying a new home, are eligible for a 10% tax credit, worth up to $6,500.
Income-eligibility guidelines for the tax credit are the same as for first-time buyers.
Military members deployed on extended active duty outside the U.S. have until
May 1, 2011, to enter into a contract, and until July 1, 2011 close the purchase.
HOW Do You Claim the Credit?
To claim your credit, you must file IRS Form 5405, “First-Time Homebuyer Credit
and Repayment of the Credit,” and attach a copy of (a) your settlement statement,
(b) a certificate of occupancy for a newly constructed home, or (c) proof of five
consecutive years of ownership, such as mortgage-interest statements, property-
tax records or homeowners insurance.
Because of those documentation requirements, you cannot e-file your tax return. Print out Form 5405 and attach it to your Form 1040. Attach the papers
referenced above to your 2010 tax return, and mail it to the IRS by April 18, 2011.
A. Download Form 5405 from the “Resource
Center” at www.HomeBusinessTaxSavings.com
B. Always mail tax returns as “Certified Mail” with
“Return Receipt Requested.”
BAD NEWS if You Took the ORIGINAL Credit back in 2008
Taxpayers who took advantage of the original home buyer’s credit in 2008 didn’t get as good a good deal. That version of the homebuyers credit, to the surprise of many taxpayers who claimed the it, the $7,500 “credit” in reality was an interest-free
LOAN – a loan that must be repaid in installments.
The first repayment is due with your 2010 tax return. If you claimed the full $7,500 credit in 2008, you now owe Uncle Sam $500/year for the next 15 years. If you sell the house before paying off that loan, you’ll be required to repay the full balance at the time of sale. Is the NEW Credit Really a CREDIT?
For those who purchased their homes in 2009 or 2010, the credit really IS a credit. It is not a disguised loan like 2008, and it does NOT have to be repaid.
Creating Tax-Smart Home-Business Owners,
Ron Ronald R. Mueller, MBA, Ph.D. – author of
“Home Business Tax Savings, Made Easy!”
available at www.HomeBusinessTaxSavings.com