The news has exploded lately with updates regarding mortgage rates and the 2010 federal tax credit for first time home buyers. The close date deadline on new home purchases has once again been extended. Now you have until September of 2010 to close the sale on your new home in order to claim up to an $8,000 homebuyer tax credit, or $6,500 if you bought a bigger house than previously owned.
However, many new homeowners are still confused about whether they qualify and how, exactly, the credit is claimed. The following is an explanation of how to claim the first time homebuyer credit if...
You Purchased a Home in 2008 or Earlier
Sorry, home purchases in 2008 or earlier don't qualify. However, ask your tax professional about a different tax credit you may be able to claim.
You Missed the Credit on Your 2008 or 2009 Taxes
If you purchased a home 2009 or 2010, but didn't realize you could claim the first time homebuyer tax credit, you can amend your tax return to fix the error. Turbo Tax details the process of amending your return specifically for this purpose. Find out how to amend your 2009 tax return for a 2009 or 2010 purchase.
Note that if you purchased a home after November 6 but before January 1, 2010, you cannot amend your 2008 tax return using TurboTax because of changes the IRS made to the Form 5405. Only your 2009 taxes can be amended.
While you're at it, be sure there aren't any other tax credits you may have missed.
You Haven't Filed Your 2009 Taxes Yet
The National Association of Home Builders created a website dedicated to providing information about the first time homebuyer tax credit. According to their Home Buyer Tax Credit FAQ, these are the following steps you must take to claim the credit for qualifying purchases:
- Complete an IRS Form 5405 to determine the credit amount.
- Claim the credit on your federal income tax return by recording this number on line 67 of the 1040 income tax form for 2009 returns, or line 69 of the 2008 1040 income tax form.
- You cannot claim the credit for a future purchase. You must have purchased your home before April 30, 2010 and the sale must close before September 2010.
You Purchased Your Home This Year
As long as you were under contract for the purchase by April 30, 2010 and escrow will close by the end September, you can apply for the first time homebuyer tax credit on your 2010 tax return. Just follow the same steps above when it comes time and don't sweat it until then.
You are a Military Service Member or Federal Employee Working Outside the U.S.
In this case, you are pretty lucky. As the IRS website explains, "Members of the military and certain other federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S.and qualify for the credit." This means that if you're eligible, you have until April 30, 2011 to enter into a binding contract to buy a home and claim the credit on your taxes. Then you will have until June 30, 2011 to close the sale.
Now that you're up-to-date on how to claim the credit, find out what else you should know about the first time homebuyer tax credit.
