Claim the tax credit with Intuit TurboTax or H&R Block At Home.
Are you claiming the home buyer tax credit with your 2009 income tax return? Read these new instructions. The credit has been extended and expanded to qualify for more people, including long-time homeowners. I’ve included some of the basic information below.
Because the IRS requires additional documentation, taxpayers who wish to claim the home buyer tax credit must filing federal tax returns on paper through the mail.
1. Download and complete the revised Form 5405. This form is available here. The form will guide you through the process, ensure you qualify for a credit, and determine the amount of your credit. Here are instructions for completing Form 5405.
2. Collect your required documentation. You will need the Form HUD-1 Settlement Statement or other settlement statement outlining the names and signatures of all parties to the sale, the property address, the price, and the date of purchase. If you do not have a settlement statement, as you might not if you purchase a newly-constructed home, attach your certificate of occupancy.
If you are under contract but have not taken occupancy of the house by the time you file your taxes — and you still qualify under the date restrictions above — included pages from your signed contract including the signatures and names of all parties, the property price, the address, and the contract date.
If you qualify as a long-time homeowner rather than a first-time home buyer, include Form 1098 (Mortgage Interest Statement), property tax records, or homeowners’ insurance records. The forms must cover a full consecutive five year period within the eight years ending on the date of the purchase.
3. Complete your Form 1040. Include your bottom line on Form 5405 on the appropriate line on your income tax return. On the 2009 Form 1040 return, this is line 67. You can’t claim this credit with Form 1040EZ.
4. Double-check your work. Check for the most common mistakes, such as not signing the return or using the wrong Social Security number. Review each form line-by-line and check your calculations. Any mistake will cause a delay.
5. Mail your forms and wait. When people began claiming the first-time home buyer tax credit last year along with an amended 2008 tax return, people were receiving the credit within six weeks. As more people began applying, receiving the credit took longer, particularly if documentation was missing.
Below is the original post explaining how to claim the $8,000 first-time home buyer tax credit when claiming 2008 income. This no longer applies unless you are revising your 2008 income tax return. If you are submitting your 2009 income tax return read this article.
Original article for claiming $8,000 tax credit for first-time home buyer on 2008 income tax returns
Thanks to the American Recovery and Reinvestment Act of 2009, formerly known as the “stimulus bill,” first-time home buyers are eligible for a refundable tax credit of up to $8,000 this year. Here is what you need to know in order to claim the credit.
Who qualifies as a first-time homebuyer? A “first-time homebuyer” is anyone who has not owned a house in the past three years. Furthermore, if you don’t live in the house purchased this year for the three years following the purchase, you will have to pay the credit back to the government. This credit is intended for people who live in their own houses, not house flippers or speculators.
What is a refundable tax credit? When tax professionals and the IRS talk about “refundable tax credits,” they do not mean that you have to pay the credit back to the government. A refundable tax credit means that if you owe less tax than the amount of the tax credit, you will receive a refund — even if you have no other tax liability for 2008. That’s not a bad deal. In other words, if you owe $200 to the government before claiming the credit, and you qualify for $8,000 for the first-time home buyer credit, rather than paying the government, you will receive a check for $7,800. Even if you had no income in 2008, owed no tax, and purchased a qualifying house in 2009, the government will send you a check for $8,000.
What if I bought the house last year? If you purchased a house in 2008 and were a first-time buyer, you qualify for the older refundable tax credit with a maximum of $7,500. This does require that you pay the $7,500 tax credit back over the course of fifteen years, starting two years after the date of the purchase. This is still a good deal. As time goes on, thanks to inflation, you are paying back this “loan” with money that has smaller purchasing power.
To qualify for the new credit with the maximum of $8,000, you must be a first-time home buyer and the sale must take place between January 1, 2009 and November 30, 2009.
Do I qualify for the full $8,000? The actual credit you will receive is 10% of the purchase price of the home or $8,000, whichever amount is lower. If your modified adjusted gross income (MAGI) as a single taxpayer is over $75,000 or if your income as a married couple is over $150,000, your credit will be phased out. The credit will be eliminated if your income is above $95,000 (single) or $170,000 (married).
How do I claim the home buyer tax credit? You can claim this credit when filing either your 2008 or your 2009 income tax return. For example, if you believe that your income level in 2009 will be too high to qualify for the credit but you already know that your 2008 income is low enough to qualify for the full amount of the credit, you can claim the credit on your 2008 income tax return.
Complete IRS Form 5405 to determine the credit amount. Here is the official revised copy of Form 5405 [pdf] that takes the new $8,000 home buyer tax credit into account. Take the bottom line amount on Form 5405 and enter the number on line 69 of your Form 1040. Not all online tax preparation software has been updated to include instructions for this new credit. I checked H&R Block Tax Cut, TaxACT, and TurboTax Online, and as of last night all three include only the rules for last year’s $7,500 credit. You may wish to wait for the software to catch up with the IRS before completing and filing your 2008 income tax return. Or, if you don’t want to wait, you can do your taxes by hand. See new updates at the bottom of this article for TaxACT and TurboTax.
If you have filed your taxes already, you will be required to file an amended income tax return if you want to receive the credit this year with your 2008 refund.
Please keep in mind that I am not a tax professional and none of what is written here or anywhere else on Consumerism Commentary should be considered tax advice. You are solely responsible for your own tax return, and any questions should always be directed to your tax accountant or the IRS.
2:00 pm update: TaxACT has contacted me to let me know that as of today, February 25, their software has been updated to correctly figure the $8,000 first-time home buyer credit. I’ve confirmed that the new calculation is now active.
February 27 update: A representative from Intuit has confirmed that TurboTax has now been updated to include the $8,000 home buyer tax credit and the change should be in effect today. I don’t see it as of 4:00 pm, but I will check again later tonight. Originally TurboTax planned on putting this update into effect as late as March 11.
Here is what a TurboTax representative said: “As with any tax changes, especially those that come very late in the season, we are reliant on the IRS to provide guidance so we can update the product accurately and completely. Once the IRS gave us the correct guidance and requirements, we immediately started working to update.”
Updated March 21, 2011 and originally published February 25, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.
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i’m a first time home buyer and will close on a house 29th of may 2009 and tring to figure out how quick can i get the $8000? the reason i ask is because i was thinking of taking out a small loan for the downpayment then turning around and paying it off as soon as i get the $8000. my only concern is if i need to wait another year to get the credit will it be worth it. anyways i’m just tring to figure out if there’s anyway of getting the $8000 credit back within a month or so after i close? thanks.
Ryan,
You have to have already closed inorder to qualify for the credit. There is something new that is allowing buyer to use the credit as their down payment, but I don’t think it will help since you close on 5/29.
It takes 8 to 12 weeks to get the tax credit. I filed my amended return on 4/18 and I am still waiting for the credit, so in lieu of the credit, I am just going to pay the down payment using my own resources and then use the tax credit to pay them back.
Randi
i also filed amended return on 4/16 still waiting. called the irs they said they are reviewing it. i think it rediculous at 12 weeks no credit. i guess you have to be gm to get money the next day from irs.
Original return filed first part of Feb 08. Amended return filed on Feb 10th to include home buyer credit. Amended return was paper filed. It is now April 17th.
Has anyone filed a paper return like I described above and actually received the credit?
From experience, does anyone know how long it takes to get the credit?
I am a first time home buyer. I am moving in with my boyfriend who currently owns his house with his roommate. His roommate wants nothing to do with the house when he moves out in October. I am trying to refinance the house with my boyfriend. Do I have to purchase the house outright to be eligible for the credit or is there some way this works out for me?
I closed on this house March 27th 2009, and just sent in my 5405 and 1040X. Also heard you needed a copy of your HUD, stating the actual contract cost/payment/offers/counteroffers, etc.
going to buy a home in May, But I won’t be able to move in till February of next year, because I am personally going to remodel my self slowly. Because I have to work. Will I still qualify??
If you’re building a new house you need a certificate of occupancy by Nov. 30, but if the house you’re buying is technically habitable when you close on it (and you don’t own a home now, right?), I would think you’d be okay. Might not be a bad idea to change your mailing address to the new place before you file your taxes next year.
Curious… I bought my house on February 12, 2009. I Claimed the $8000 on my 2008 tax return, but the IRS changed that amount to $7500 because I claimed it on my 2008 return rather than waiting for 2009. I didn’t see this specified anywhere, I was just wondering if that happened to everyone? And can we claim that extra $500 on the 2009 tax return?
The 2008 tax return is different. It is the one you have to pay back. You should have filed an ammendment for this years tax return (for 2008 but filed this year) and then you would have gotten the 8000, if this is what you did then something doesn’t sound right and you should call the IRS customer service to see what you need to do, because if you purchased this year then you should be getting the 8000 credit, not the 7500.. The 8000 is 10% or 8000, so also if you purchased a home that was 75,000 then that could be the reason you only received 7,500.
Does anyone know what “supporting” documents I am required to send with 1040x and 5405?
yes, you need to send a copy of the HUD statement as proof of purchase. This is what I sent, along with the 2 you mentioned…and I received my tax credit yesterday via check by mail. It was mailed out I think around mid march so it took about 6 weeks. Not too bad!!!
RAWK ON!!!!!!
That means that 6 weeks from mid-april i get 8K for sending that in
If anyone can help me with this:
We are just to close Escrow, so we should be able to qualify for the Credit. My father and I will be buying the house. My father is just a co-signer, my husband and I will be living there and making the payments, so in reality it’s our first home owned. My father currently owns his own home. My husband and I file our income taxes jointly. He does not have Social Security, so he uses and ITIN number to file. Does anybody know, if this will affect us in receiving the Credit, Thank You
In general, both the parties have to have a SSN to recieve the credit. I am in the same boat. Please let me know if you know any other exemption.
Anyone have a number that I can call and check on the 8000 dollar credit
Parents who do NOT qualify for $ 8,000.00 tax credit just bought WITH unmarried child who DOES qualify for the tax credit … CAN child get PART or ALL of the tax credit … and HOW to do it. All appear on deed and all debt instruments > CO-MORTGAGORS and not just CO-SIGNERS.
our son married a woman that owned her own home, but they were divorced this year. He is purchasing his own home next month. Will he qualify for this $8,000 stimulus refund on his 2009 tax return?
What if i applied to the credit but i can the house now cause i got fired from my job. What happens if i keep the money? how do i repay it?… Vlady
My wife, son and I purchased a home for our 27 year old son to live in while attending school in another town. All 3 of us are on the note and the morgage papers but my wife and I have made all the payments. His fiance’ closed on a home on 05/19/09. She had been trying to buy this house since 02/09 and has not owned a home during the last 3 years. While her buying and financing process drug on, my son and her were married on 04/18/09 which changed things. The lender did not require him to sign the note but did demand he sign the deed so technically he now owns this house with his new wife. Can they continue to file seperate 1040 forms in order for her to claim the $8,000 tax credit or did they just get married 31 days too soon? If her marriage to him made her ineligible can they obtain an annullment and then remarry in order for her to legitimatetly claim the credit? It seems unfair to allow co-habitaing but not married couples to claim the credit and then penalize this couple for getting married before she closed on her house. How about if she files as single using her new address while he files as single using his old address? Is there some kind of proof of their marriage date required when they begin fililng a joint return for 2010? Obviously we’d like for her to be able to claim the $8,000 tax credit on her 2009 return she’ll file during the first quarter of 2010.
IF OUR DAUGHTER PAYS 150K IN CASH FOR HER 1ST TIME HOME, IS SHE ELIGIBLE FOR THE $8K? SHE’S A TEACHER AND MAKES LESS THAN 30K/YR.
Sallie,
I don’t believe her method of purchasing the home has any bearing on whether she can claim the tax credit or not. All info requested on IRS From 5405 pertains ONLY to the purchase, not to whether any financing was obtained or not. As long as she’s the only person listed on the deed she should be eligible for the full credit. If you or any other person is on the deed with her, she will only be entitled to the relative percentage of the $8,000, e.g., if your name appears on that deed to her house, she’d only be entitled to 50% or $4,000.
I sent out my amendment form for the new house tax credit, i mailed it May 7th,
does anyone know how long it will take for us to receive our refund. H & R block did the paper work but we had to mail it. so does anyone know how long it will take? I sure could use the money now.
It took 10 weeks for my son to get his back.
we have been waiting 13 weeks, we sent ours off on april 8 after calling them yesterday they are now telling me it could take up to 16 weeks
My boyfriend and I are buying a home. He has never owned and I am in the process of selling mine. To qualify for the $8000 – my name could not be on the deed at date of purchase.?? Could be on the loan at date of purchase?? Is it possible to then add my name to the deed say a month later?
Is Flexo no longer blogging on this site? I’ve not seen a comment from him since 03/29/09 and I was really looking for an expert’s advice to my post from 06/04/09. If anyone else out there knows the answer or can refer to someone or web site with the answer I would greatly appreciate it. Thanks!
Amy,
I believe as long as you and your boyfriend were not married prior to the purchase he can claim the entire $8,000 but if your name appears on the deed to the newly purchased home he is only eligible to claim 50% or a $4,000 tax credit. You might refer to my earlier post from 06/04/09 to see me whining about the fact my son and daughter in law got married during the 90 days it took from her loan application date to her closing date. If you’re not on the deed to the new house and provided each of you file separate tax returns he (and you if he’s inclined to share) not only is entitled to the $8,000 but can even file an amended return for 2008 now and receive that money likely within about 10-12 weeks instead of having to wait until 2010 to get the money. Be sure he attaches IRS Form 5405 in order to receive the refund. It’s a very simple 1 page form and can be downloaded from the IRS web site. Hope this helps.
My husband and I just moved into (in April 09) a home that we built ourselves. We have no mortgage so no HUD or anthing like that. We do however have reciepts for everything we bought. Would we still qualify for the credit or do you actually have to borrow money?
You certainly do qualify! We’re in the same boat, and all you need to provide is a certificate of occupancy.
You apply for and receive the credit after purchase. You need to pay for the down payment and closing costs at purchase time.
You do not have to borrow money.
i am wondering, my boyfriend owns a home and looking to refinance but requires a co-signer due to high dedt ratio. I have not owned a home in the past 3years and file a seperate tax return- do I qualify for the tax credit or half of the credit? plus I live in the home and my name will be added to the deed. let me know, thanks
Since it’s not technically a purchase neither of you qualifies for any of the credit…UNLESS the lender handles the loan as a purchase money transaction in which your boyfriend sells the home to himself and you with a warranty deed or any other form of property sales form your particular state recognizes. By selling it rather than calling it a refinance the home ownership actually changes title from John Doe, an unmarried person to John Doe, an unmarried person and Mary Jones, an unmarried person. That way both of you own as tenants by the entirety. I would not recommend holding title as tenants in common because if you do and either of you dies, the property will get tied up in probate (expensive process) and the surviving owner is not entitled to the entire property.
HI GARY, If i have not filed for the home buyers tax credit can i wait until i file for my 08 taxes next year?? i purchased in march 08
I filed an extension this year, knowing I would purchase a house this year. We have decided to build a house that won’t be finished until the beginning of November. I have to file taxes by October 15. Can I still claim this house for 2008 taxes?
You will need a Certificate of Occupancy by the time you file your 2008 return; however, the automatic extension for your 2008 return is not the final extension you can get. As long as you’ve paid at least 90% of your tax liability by 04/15/09 you can file for another extension on that return prior to 10/15/09. The IRS doesn’t have to approve your request but in most cases they don’t have any problem with issuing another 90 day extension. That should allow you to obtain your Certificate of Occupancy while still being able to claim the tax credit for 2008. Disclaimer…..I am not a tax professional and you should not rely on any of my suggestions as gospel. That’s why tax professional must prove their qualifications and make their income from dispensing advice knowing they have a bond guaranteeing you their advice is sound (although they’ve been known to make mistakes as well).
I made under $75K in 2008. I changed jobs in October 2008 and will make more than $75K in 2009. I purchased a condo in April 2009 as a first-time home buyer. Originally I thought I would only get about $2K of the potential $8K for the homebuyer tax credit when I file my 2009 return.
However, does it makes sense to file for the credit this year using a 2008 amended return? Would I most likely receive the full $8K using a 2008 amended return?
MJ,
This isn’t even a close call. It’s a “no brainer”. By all means file an amended 2008 return in order to receive your tax credit within about 10 weeks of filing that amended return. You can even file the amended return electronically but still tax credits are reviewed by IRS eyes in about 40% of the cases so you’re probably still looking at 8 weeks or so if you refile electronically. Don’t forget to attach IRS form 5405. Some folks have filed amended returns and been disappointed when hearing from the IRS over 2 months later that they failed to include that critical form. Save yourself some frustration and download the form from the IRS website now while you’re thinking of it.
i’m kinda in the same situation…
my 2008 income qualifies me for the 8k credit, however my 2009 income wont. i’ve been wondering if i can buy anytime this year before dec 1, 2009 and simply amend my 2008 income to get the 8k? or do i have to buy and close escrow by a certain date to be able to use my 2008 income? i was thinking that if i purchase more towards at the end of the year, i’d have to use my 2009 income (and def i wont qualify = ( … )
Gary,
Thanks so much for your help. Just one follow-up. Is there a deadline for filing 2008 amended returns?
Yes, generally speaking there is a time limit. There are some extremely rare cases dealing with returns filed by expatriots where they might be allowed to file a 1040X for up to 10 years past the original filing date but for this discussion you may file an amended return up to 3 years after you filed the original or 2 years after you actually paid the tax liability, whichever term is shorter. For example if you filed your return 04/14/07 for the 2006 tax year you have until 04/14/10 to file a 1040X UNLESS you didn’t actually pay your full tax liability until a later date of say 10/15/07 in which case you’d have to file the 1040X by 10/15/09. Expect to receive any additional money due you no sooner than 10 weeks after you file the 1040X, particularly during the summer months when more IRS employees are on vacation. That’s because just as Flexo says below, you can complete your 1040X using tax preparation software such as Turbo Tax or Money but you can not file it electronically. You will need to print off a copy (also one for your records) and mail it to the IRS (don’t forget to include any forms supporting your request for an additional refund like the 5405 when claiming part or all of the $8,000 first time homebuyer credit) because amended returns actually have an IRS employee review them before they give you any money back. My local IRS office states their policy allows for 8-12 weeks to process and get you your additional refund. That still beats waiting until 2010 to get it after filing your 2009 return though.
I was under the impression that the IRS didn’t allow you to efile amendments! How do you do this? I was just getting ready to mail mine today, but if I can efile I’d sure rather do that!
Thanks!
You can use online software for completing your amended return but you must print and file the form by mail.
MJ,
I was incorrect in advising you that you could file a 1040X electronically. Flexo is correct when he says you can use tax software to complete the form but you MUST print and mail it to the IRS along with any supporting documents such as the 5405 form. See, I told you I wasn’t a tax professional. (smile)
i’m kinda in the same situation…
my 2008 income qualifies me for the 8k credit, however my 2009 income wont. i’ve been wondering if i can buy anytime this year before dec 1, 2009 and simply amend my 2008 income to get the 8k? or do i have to buy and close escrow by a certain date to be able to use my 2008 income? i was thinking that if i purchase more towards at the end of the year, i’d have to use my 2009 income (and def i wont qualify = ( … )
riesling,
The Warranty Deed must show ownership of the property being transferred to you on or before 12/01/09 period! As far as filing an amended 2008 return you’ve got plenty of time to file that 1040X return to claim your tax credit. Here’s a question for you though. Since it requires filing an amended return to claim this on your 2008 return and you can’t file your amended return by e-file does it make more sense to go to the trouble of filing a hard copy only to wait 10-12 weeks to receive the money as opposed to just filing your 2009 return as early as possible in 2010 (let’s say 02/15/10 hypothetically) electronically and receiving your refund/tax credit within about 3 weeks? It may be about as broad as it is long but less paperwork if you don’t buy until close to the 12/01/09 deadline. You file an amended 2008 return on 12/05/09 and wait until perhaps as late as 03/05/10 or just file for the credit on your 2009 return electronically and receive your money/credit within 2 or 3 weeks of filing???
My father helped me qualify for a home so his name is on the deed, can I take him off the deed for me to qualify for the $8,000.00. He has his own home, this home will be my first home bought and I will be living there, I will be making all payments.
Jess,
If he had to be on the deed for you to qualify it’s likely his name also appears on the mortgage. It’s problematic as to whether your lender (assuming one is involved) would allow you to remove your father from the loan and the deed. A Lender’s philosophy runs along the lines of “we’d rather have 2 horses pulling the wagon instead of 1 if given the option.” You are still entitled to 50% of the tax credit expressed as 10% of the purchase price not to exceed $8,000. This is because you and your father are co-owners and while he isn’t eligible to claim any of this tax credit the co-owner who meets the qualification of not having owned a home in the last 3 years DOES qualify for a percentage commensurate with the percentage of ownership he has in the new home. In other words if your purchase price was $60,000 you’d be entitled to claim $3,000 but if the purchase price was $80,000 or more, your credit maxes out at $4,000.
We are purchasing a home right now. I bought a house 11 years ago, we are still in it. My husband moved in when we married and I filed a quick claim deed for him. Our house is on the market but I doubt it will sell before the closing on the new house. In this market…who knows how long we will have double payments. Our income would qualify us for the 8000 credit. What about the fact that we still have a house? Will that disqualify us?
Tricia,
You are not eligible to claim any Tax Credit in connection with purchasing a new home. The fact that you and your husband are on the deed to your present home at this time or any time within the last 3 years disqualifies you for this particular credit.
We bought our first house on 29 december 2008. Is there anyway we can claim the $8000 tax credit.
Ripa,
Sorry but timing really is everything with this program. Had President Elect Obama announced he intended to get this legislation introduced and passed prior to taking office it’s likely a lot of people would have postponed closing on their purchases. You still got a good deal if you qualified under the old plan by getting to claim the $7,500 tax credit on your 2008 return even if you are required to pay it back over the next 15 years. It’s an interest free loan which only requires you to repay $500 a year as long as you own the house. Of course if you sell the house in 10 years you’ll have to repay the remaining $2,500 of the original $7,500 from the proceeds of your sale unless you want to trust yourself to have an extra $2,500 lying around on April 15th. It’s true the 2009 Act is a much better program for first time homebuyers by allowing 10% of the purchase price up to the maximum of $8,000 and not requiring any payback at all the 2008 deal still was a bad one either. Bottom line is that in order to qualify for the entire $8,000 with no payback you must not have owned a house for the previous 3 years and close on your purchase between the dates of 01/01/09 and 12/01/09 inclusive.
What portions of the 1040X do I have to fill out for the first time home buyers credit
George,
You’ll need to complete all of it but it’s a fairly straightforward form which pretty much walks you through all the steps. Just be sure to attach your form 5405 which is even a simpler form to complete. Just follow the instructions on the form and remember that you must mail your 1040X along with the 5405 and supporting documentation to the IRS. You can not file a 1040X electronically. You can go to http://www.irs.gov for additional information and froms suitable for printing. Good luck!
I have owned my home for 3 years. I am considering refinancing with my boyfriend. He qualifies as a first time home buyer as he has not owned a home in the previous 3 years. Will he be allowed the credit if I refinance with him, which would make him a first time home owner?
If not, I’m considering selling my house to him. We’re planning on putting the entire credit against the mortgage to lower our payment. I’m not concerned about selling to him as we’re planning on getting married in 2010 and I trust him expliciately. Also, both of our wills will clearly state where the house would go if one of us were to die.
I want to make sure which ever way we do it, it’s completely legal. Is it?
If you refinance in both names before 12/01/09 and you are not married yet, he may claim 5% for his portion of the value of the home up to a maximum of $4,000; however, if you sell the home to him under a warranty deed and he can qualify for the home loan by himself without you on the loan, he can claim 10% of the purchase price shown on the transfer (sale price) up to a maximum of $8,000. Oftentimes a person who is attempting to do this won’t qualify to borrow the money because of a high debt ratio. With the crazy market we’ve been in for the last year or so, most underwriters have gone back to the old standard ratios of only 28% of a person’s gross income being allowed to go toward the PITI (principal, interest, taxes and insurance) total payment followed by a maximum debt to income ratio (including all debt monthly payments + the house payment) of 36%. Those figures had gotten up to 35% and 40% respectively until earlier this year when virtually all underwriters began tightening the reigns on credit. If he doesn’t qualify by himself you’ve still got the option of selling the home via warranty deed to both of you as part of the refinance and him (only) claiming 5% of the purchase (refinance amount) price up to a maximum of a $4,000 credit.
I am purchasing my first home and I need to know how to use the $8000 tax credit,What I need to know is how do I go about acutually getting the money now so that I can use it as a down payment ,I don;t want to wait till I file my tax return.again I need to know what the steps are to get the money now
What you are inquiring about is probably the most misunderstood item related to the First Time Homebuyer Tax Credit out there today. There are very precise steps that must be followed closely in order to gain access to the $8,000 and actually use a portion or all of it as down payment money. There are even some attorneys who disagree on this. Some say you must file an amended 2008 tax return and wait the 10 to 12 weeks it takes to receive that money before closing on the loan while others say they’ve figured out a way to apply it directly as down payment money. Still others say the only way to pull this off is if you’re obtaining an FHA, VA, FMHA (Farm) or a loan that is preapproved by Fannie May or Freddie Mac. The only cases I’m aware of where anyone was actually been able to utilize the money as down payment funds were those loans administered by the United States Department of Agriculture Rural Development Agency. With this program you don’t actually apply the $8,000 Tax Credit to the down payment itself but rather this agency funds the loan with zero down payment which leaves you with getting the $8,000 later to use for furniture, adding a patio, etc. but be aware you must have a decent credit score (or no score at all) to qualify for this type of loan. The home doesn’t necessarily have to be located in a sparsely settled area but I do not believe homes in major metropolitian cities are eligible for this special program. Since this particular program is so specialized I would recommend you speak with a mortgage professional and more specifically a mortgage broker. I say this because the brokers must stay up to date on every little nuance which involves mortgage lending because they utilize so many different funding sources; much like independent insurance agents who write policies through a variety of companies and not just one company. Find out more about this special no money down loan program at USDAloans.com
How does the goverment know if I owned a house in the last three years? What about this vacation home exemption? What if I owned the property but rented it out and lived with someone?
Bill,
Don’t you know the government has almost everyone “on the grid” anymore? Seriously, they use Social Security Number matches to see if you claimed any mortgage interest as a tax deduction on your last three years of 1040 forms. If a lender issued you a 1099-M form for any one of the last 3 years they also supplied the government with the same information. Vacation property can be exempted only if it is truly located in a recognized tourist destination spot and you can prove you didn’t stay in the house/condo for more than 14 days during any one year period. Be careful as filing a false return is a Federal Crime and not viewed lightly by the IRS. You need to be knee deep in facts and supporting documentation if you intend to claim the only property you owned was a rental. The IRS can be quick to challenge your reporting for the last 10 years with a special emphasis on the last 3 years. You are on your own if you try to get cute and “beat the system”.
I bought a home in 2009. My sis co signed for me cause I had too much credit out. Can I get the full 8,000. The house is all mine and she has no interest in it. She was just helping me out on paper. I filed an amended and the irs got it 3/26. Still no word. They said Wait an additional 30 days for a response. And they are paying me interest. And if still no word by 7/16 a specialist has 7 days to contact me. I just hope they are not gonna want her to file for half. Cause she will not wanna do it for me till next year.
yvonne,
Check your paperwork closely. Odds are that if sis had to co-sign for you she also has an interest in your property although this can vary by state. Most lenders don’t like complicated arrangements and usually put all signers on the promisory note AND the deed. While I’ve seen cases of multiple owners on a deed with only 1 of the owners on the note it’s rare (but not impossible) a lender would require her to sign the note and not the deed. Your lender can tell you if at the end of the year they plan to issue a 1099M form (interest paid on the home loan) to you only, 1 for each of you or if they plan to list both your names on 1 form and let the 2 of you sort it out between you as to who will take the mortgage interest paid deduction on your 1040 (tax) forms. If sis’ name and signature appears on the deed along with your name she is definitely a co-owner. The question then becomes “did you take title as tenants in common or joint tenants with rights of survivorship?” If you took tile as JTWROS and you die, she gets the house. If you took title as tenants in common, only your immediate heirs are entitled to the property, e.g., husband, a parent or children of legal age. They would also take ownership with the obligation to satisfy the mortgage debt. If your sis has owned a home in the last 3 years I would say you most likely will qualify for only half of the $8,000 tax credit. The IRS may have set your request aside for special handling in order to determine how much if anything you are eligible for; hence the extra 30 days. This is assuming you did remember to attach form 5405 to your request. Don’t be offended. You wouldn’t believe how many people have filed for this tax credit and failed to attach the proper documentation.
Hey, thanks for the reply. My sis and I have never owned a home and the paperwork shows joint tenants. We both would qualify. So I know worst case scenario would be we would each have to claim half. I did include form 5405. I actually had hrb do my amended return. But even they weren’t sure. Cause they said this is all new. She helped me on paper. But when it comes to the house It was my down payment and the lender said they could remove her in 2 years. And all the paperwork comes with both our names on it. I wonder if I can let the irs know all this?
At this point my advice would be to just wait like the IRS says to see if they need any additional information. Whether you own this house or you and sis own it still depends entirely on whether her name and signature appear on the deed. It’s interesting that even H & R Block’s rep couldn’t give you a definitive response. As you said, it sounds like the very worst that could happen is that you and your sis will each be eligible for $4,000. My guess is that you’ll have your money by the first of August.
Hi all,
I read thru all the blogs rather quickly to try and find an answer to my question, but didn’t see it asked anywhere. I am wondering if purchasing a home via land contract, rent-to-own, or lease with option qualifies for the tax credit. I have never owned a home and right now, thanks to a nasty divorce, I don’t have the credit for a conventional loan. Anyone have any idea? Thanks!
shannon,
The whole idea behind the $8,000 tax credit for first time home buyers is to assist people with obtaining home ownership. Unfortunately, land contracts, rent-to-own or lease with option transactions do not get the home transferred into your name prior to 12/01/09 in order to be eligible for the credit. If you can get a seller to actually SELL you the home and carry back the mortgage on it which still requires you to make monthly payments on it, a warranty deed (transfer of ownership) would be created and filed at your county courthouse in the Recorder of Deeds (sometimes called Registar of Deeds) office which WOULD make you eligible for the tax credit. The deed must be transferred into your name by 12/01/09 to qualify under the existing act. Be careful when purchasing via land contract or any other method that does NOT actually involve a transfer of the deed! Have an attorney review any such agreement before you sign it. In many cases, the tax paying home owner can evict you with no more than 30 days notice if he later decides he’d rather get all his cash sooner rather than later. Also if he doesn’t pay the real estate taxes the taxing authority could actually seize the home and sell it out from under you on the courthouse steps to another party (often an investor) who once again can evict you by serving notice of his plans to do so. While any TRUE mortgages can be sold to another party the buyer of the note can NOT change any of the terms your original seller agreed to when he sold you the home.
i will be buying a mobil home with land that was originaly worth $45k i will be taking over the loan via owner finance assumable loan with about $40k on the loan will i qualify for the 10% tax credit and if so will it be for $40k or $45k
A mobile home does qualify under the act provided it includes the land it sits on. Your tax credit can not exceed $4,000 because that represents 10% of what will be considered your purchase price. The actual value of the home plays no part in the calculation. While the seller has assured you his loan is assumable, be positive his lender agrees and is willing to have you sign documentation which obligates you to pay the lender directly ( don’t make payments to the seller if he suggests you do so and he’ll make the payment to the lender) and assures you there’s no way the seller can ever come back and reclaim the property. Oftentimes lenders will allow a buyer to assume a mortgage obligation via what is called an ASSUMPTION AGREEMENT; however, they retain the right to go after the seller in the event you should default on the loan. That’s why a lot of veterans who purchased homes several years ago utilizing their VA benefits and then sold them via assumption agreements found that when they went to use their VA benefits again to purchase another home discovered they could not use the benefit of a VA loan a second time until the previouis loan was paid off. In some cases that might be several years before the buyer of their previous home would refinance or sell that other home.
I purchased my home in 1994 sold it to my son in 2005 to prevent a foreclosure and be able to stay in the house. He bought it from me for $125,000 and I gifted back $25,000 so the loan amount ended up being only $100,000. I paid rent every month since. The house would sell for around $139,000.
I would now like to purchase my home back now. I heard there is a relative clause in the stimulus package that prevents you from buying or selling among relatives is this true? If not what is the best way to purchase the home back and be able to have him gift the most monies back to me or at least a part of the $25,000 I gifted to him and take advantage of the $8,000.
Kay,
The IRS refers to real estate transfers that are “less than an arm’s length” transaction, i.e., transfers between relatives and those are scrutinized very closely. They have seen just about every trick in the book; however, that doesn’t mean it’s unlawful for relatives to sell property among themselves. What the IRS does look for are transactions involving sales under market value and moving property in and out of Trust Accounts to avoid taxes. I would not feel comfortable giving you advice about your specific situation and instead would encourage you to seek competent legal council before moving forward with your proposed purchase from your son. A tax attorney isn’t cheap but he/she could still be a bargain if you can legally construct this property transfer and claim the $8,000 tax credit. More importantly, a tax attorney could prevent you from making a technical error that might result in not only missing out on the tax credit but subject you to some sort of penalty for attempting to claim the credit when you were not qualified to do so. Caution should be used before attempting to put together something that could later unravel on you after you receive the $8,000 and wind up costing you not only the $8,000 but additional tax and penalties.
I am purchasing a house which is scheduled to close July 31st, 2009 and the bank told me I qualify for the $8000 from the government so how do I go about collecting it? Can I get it this yeaar or do I have to wait until tax time next year? Thanks!
David42,
You can claim the $8,000 sooner than next year by filing an amended 1040X return as soon as you close on your home; however, be prepared for a lengthy wait to receive your funds. Amended returns can not be filed electronically but have to be completed and delivered by snail mail. The wait was initially 10 weeks, then 12 weeks and some people who filed up to 14 weeks ago are still waiting for their money. If you file your 2008 amended tax return, complete with form 5405 (download this from IRS.gov/forms) during the first week of August you “might” get your check by Christmas. With the economy being what it’s been it seems the majority of qualifiers for the tax credit have chosen not to wait until they file their 2009 returns and the volume has just swamped the IRS with requests.
Thanks Gary, Will do just that. I am going to buy the house back regardless of getting the $8,000 or not. I was wanting to find out if it was possible to get to take advantage of that tax break as well. Thanks for your advise.
Have a great 4th.
if we were to rent out the basement in the house we were looking at getting would we still be able to get the credit?
I believe you might techncially disqualify yourselves since a portion of the home you’re purchasing would be considered commercial property; however, I suspect you would probably not be challenged if you aren’t going to rely on the rental income to qualify for any loan you might be obtaining to purchase the home. One thing for sure is that if you do NOT rent out a portion of your new home until after the 3 year moratorium expires you would be entitled to keep the entire 10% of the purchase price up to the maximum $8,000. The 3 year waiting period is how long you must stay in the home as either your first or second residence in order to escape the clause in this Act that would require you to repay the tax credit to the government. Remember, the intent of this Act is to encourage more renters and other non-homeowners to invest in a single family home. There will be some folks taking advantage of the ability to convert a bedroom into a home office for which they can deduct a portion of their house payment commensurate with that potion of their home which serves as an office for their small business, e.g., if your home is 2,000 SF and you use a small 10 x 20 room for an office you can deduct 10% of your utilities and house payment as a legitimate business expense. Some people might suggest you just keep the rental agreement “off the books” and always have your tenant pay in cash but as a business professional I can’t really advise you to do that.
so i purchased a home this year late march and i applied for the 8,000 dollar refund and i recieved a letter from the IRS saying i purchased the home too late. Is there anyone who can help me figure this out?
There are 2 programs you could refer to when claiming the Tax Credit. The first one has to do with the $7,500 Tax Credit for qualifying first time home buyers who purchased in 2008. That’s the one that has to be repaid over a 15 year period of time. The second one is for the 2009 Tax Credit which is $8,000 and never has to be repaid as long as you made your purchase between 01/01/09 and 12/01/09 and don’t move out of the home for a minimum of 3 years. You may have done what some others did and checked the wrong box on your form 5405. If that’s the case, be glad the IRS didn’t give you the $7,500 Credit because you’d then have $500 withheld from your future tax refunds for the next 15 years. You may ask yourself why the IRS couldn’t look at your attached documents and know full well you were actually applying for the 2009 credit but you have to remember……..you’re dealing with the IRS here. It shouldn’t be too hard to clear up though. Just file an amended 2008 1040X and be sure to check the box on form 5405 identifying the credit you’re applying for is the $8,000 one for a home purchased in 2009. Not a bad idea to attach a copy of your loan settlement sheet as well (HUD 1). Remember that you can’t file this 1040X form electronically. It must be mailed and the wait for the check at last count was up to 14 weeks and counting. If you file by 07/15/09 you “might” get the refund check before Christmas.
My home is being built but it wont finish till nov. 30th barring any problems. I dont think I will close by DEC 1, 2009. What can I DO? Did I just lose my 8k?
Unfortunately it would appear that you will likely miss out on this particular portion of the Stimulus Act but you might want to consider splitting the $8,000 with your contractor if he can get your home finished to the point where a lender is willing to make the mortgage loan no later than 12/01/09. Even if he can’t do that just remember that many folks jumped on the bandwagon to beat the 12/31/08 deadline in order to get the $7,500 Tax Credit which has to be repaid over the next 15 years only to discover that had they waited until January, ’09 their Tax Credit would have been $8,000 with no payback required at all. Who knows what incentive might be made available out there after 12/01/09, particularly if the economy is still sputtering along at that time.
Thanks for the help Gary.
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