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Are you eligible for the new $8, 000 first-time homebuyer tax credit? Wondering how to claim it? Well, you’ve come to the right place. Earlier today, a sharp-eyed reader named Sonny pointed out that the IRS just issued a revision to Form 5405 yesterday. This form, title “First-Time Homebuyer Credit” walks you through the process of claiming your credit.
In hopes of answering a few FAQs, here are some tidbits from the instructions:
Who Can Claim the Credit
In general, you can claim this credit if you purchased you main home located in the United States after April 8, 2008, and before December 1, 2009 and you (and/or your spouse if you are married) did not own any other main home during the 3-year period ending on the date of purchase. If you build a home, you are assumed to have purchased it on the first day that you occupied it.
Who Cannot Claim the Credit
You cannot claim the credit if your modified adjusted gross income (MAGI) is $95k or more ($170k or more for married filing jointly). You are also excluded if you are a non-resident alien, your home is located outside the United States, you acquired the home gift or inheritance, or you purchased it from a related person. There are also a few other somewhat esoteric exclusion, so be sure to read the form carefully.
Details of the Credit
For homes purchased in 2008… The credit will still be little more than an interest-free loan which will have to be paid back in 15 equal installments starting in 2010. If your home ceases to be your main home before the 15 years is up, you’ll have to pay back the balance in the year in which you move.
For homes purchased in 2009… The repayment requirement is waived as long as it’s your main home for the 36 month period beginning on the purchase date. If your home ceases to be your main home within that 36 month period, you’ll have to pay back the credit in the year in which that happens. There are some exceptions, so be sure to read the instructions carefully.
The amount of the credit is the smaller of $7500 ($8000 for homes purchased in 2009) or 10% of the purchase price of the home. You get the full amount if your MAGI is less than $75k ($150k for married filing jointly). The credit is gradually phased out from $75k-$95k ($150k-$170k for married filing jointly).
What This Means for You
If you’re using a tax pro, make sure they’re up to speed on these changes. They should be, but you can never be too careful. If you’re using tax prep software such as TurboTax or TaxCut, be sure to download any updates (the online versions should be automatically updated). If you do your taxes by hand, be sure to download and use the latest version of IRS Form 5405.