Tax Credit Key to Market in 1st Quarter 2010
This important incentive is helping to stabilize the housing market in communities all across the country. Extending and expanding the home buyer tax credit will enable even more families to take advantage of current low interest rates and affordable prices to invest in their future through homeownership
As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress passed new legislation late in 2009 that:
Extends the First-Time Home Buyer Tax Credit up to $8,000 to first-time home buyers until April 30, • 2010.
Expands the credit to grant up to $6,500 credit to current home owners purchasing a new or existing • home between November 7, 2009 and April 30, 2010.
Who Qualifies for the Extended Credit?
First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.•
Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used • the home being sold or vacated as a principal residence for five consecutive years within the last eight.
How is a Buyer's Credit Amount Determined?
The price of the home. •
The buyer's income. •
Can a Buyer Still Qualify If He/She Closes After April 30, 2010?
Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect • on April 30, 2010, the purchaser will have until July 1, 2010 to close.
Will the Tax Credit Need to Be Repaid?
No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or • more. However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale.
What Forms are Needed to Apply for the Tax Credit?
The IRS has released IR-2010-006 providing a revised Form 5405 to reflect the changes to the tax credit • made in the extension and expansion legislation enacted in November 2009. The release reminds taxpayers that all tax returns claiming the tax credit must be filed manually (i.e., they cannot utilize the IRS E-File automatic system). The revised form includes a section for those repeat buyers who are eligible to claim the $6500 tax credit. The HUD-1 or evidence of the transaction must be filed with all returns claiming the credit (both the $8000 and $6500 credits). Individuals who claim the repeat buyer credit must also provide evidence that they have owned and used the prior residence for 5 consecutive years. The instructions indicate that property tax or homeowners insurance records are sufficient for this purpose.
These forms are available at www.irs.gov.