KEY FEATURES OF NEW TAX CREDIT

For New Homebuyers

  • Maximum $8,000 tax credit (equal to 10% of home price).
  • Must purchase by April 30, 2010 and close by July 1, 2010.
  • Cannot have owned a primary residence for 3 years prior to purchase (rules vary if there are multiple buyers where one has previously owned, talk to your CPA).
  • Income limits of $125,000 for singles and $225,000 for married couples (credit phases out for incomes above these limits).
  • Maximum home purchase price of $800,000.
  • Purchases by dependents no longer allowed.
  • Must attach documentation of purchase to tax return.
  • Cannot claim the tax credit if you are purchasing the home from a “close” relative (as defined by the IRS, or from a business you own).
  • Tax credit is not available for use as a downpayment (unless you are financing through a state housing finance agency that has a program for this).

For Existing Homeowners

  • Up to $6,500
  • Must purchase between November 6, 2009 and April 30, 2010, and close by July 1, 2010.
  • The homeowner must have lived in their current home as a principal residence consecutively for 5 of the previous 8 years.
  • Same income and home price limits as for new homebuyer tax credit.

Filing for the Credit

  • Anyone claiming the credit on their 2009 taxes will need to use the new Form 5405, that has not yet been released (as of 1/15/10) – available at the link below
  • Anyone claiming the credit on their 2009 returns will need to file paper copies, no e-filing, and will need to provide at least an executed HUD-1 settlement statement (additional paperwork may be required)
  • Qualifying purchases in 2010 can be claimed on their 2009 or 2010 taxes
  • Amended 2008 returns to claim the credit seem to be having processing delays, but should still be able to use the old Form 5045

You can find answers and some more detailed scenarios for situations with multiple borrowers at the IRS website:
http://www.irs.gov/newsroom/article/0,,id=215791,00.html?portlet=7

We always recommend speaking with your CPA or a tax professional before making a purchase decision based on the tax credit.