Thinking of claiming a first-time home buyer tax credit? Time’s running out

April 06, 2010|David Pitt, Associated Press

If you’re thinking of taking advantage of the home buyer tax credits, you must have a contract to purchase a home by the end of this month.

First-time buyers can get a credit of up to $8,000.

The government also offered a tax credit of up to $6,500 to longtime residents who buy a new principal residence — no credits for vacation homes.

Some of the basic rules:

Who qualifies?

■ First-time home buyers: You must not have owned a home in the last three years. The tax credit is 10 percent of the purchase price, up to a maximum of $8,000. This applies to a single taxpayer or a married couple filing a joint return. Married couples filing separate returns qualify for half that amount. Of course, your situation may not be clear cut. The IRS outlines different scenarios at http://tinyurl.com/opgukl.

■ Longtime residents: You must have owned and used the same home as your principal residence for at least five consecutive years of the eight-year period ending on the date you buy your new home.

The maximum credit is $6,500 for a single taxpayer or a married couple filing a joint return, or $3,250 for a married couple filing separate returns.

The deadline

You must enter into a binding contract to buy a home before May 1 and close before July 1. If you’re building a home, the purchase date is considered to be the date you first occupy the home.

How to claim the credit

Use IRS Form 5405, revised in December. It must be filed with your 2008, 2009, or 2010 federal income tax return, depending on which year you’re claiming the credit. If you have already filed a 2008 or a 2009 return without claiming the credit, you can amend your return.

Certain additional supporting documents will be required, including a copy of the settlement statement used to buy the home.

Those seeking the credit for longtime residents will need to prove they have lived in their home for five consecutive years by providing mortgage interest statements, property tax records, or insurance records.

Income limits (for full credit)

■ Purchases after Nov. 6, 2009: Single taxpayers, up to $125,000; married couple filing jointly, up to $225,000.

■ Purchases before Nov. 7, 2009: Single taxpayers, up to $75,000; married couple filing jointly, up to $150,000.

The IRS uses your modified adjusted gross income, which for most people is the adjusted gross income on your tax form with student loan, tuition, and fee deductions added back in.

David Pitt writes for the Associated Press.

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