In November of last year, President Obama and Congress expanded the home buyer tax credit to cover more people who have purchased houses in 2009 and 2010 and to further stimulate the real estate industry. Earlier this month, the IRS released an updated tax form to include the new rules. If you want to claim the home buyer tax credit, you must file your tax return on paper. You will not be able to electronically file because the IRS requires additional documentation.
Here is what you need to know in order to receive the full tax credit offered by the government.
How to qualify for the home buyer tax credit
Both first-time home buyers and long-time owners can qualify for a credit. A first-time home buyer for the purposes of the credit is someone who has not owned a home (or whose spouse who has not owned a home) during the three-year period that ends on the date of purchase of the new home. If the house was purchased on November 30, 2009, to qualify you must not have owned a home since December 1, 2006. The earliest date to qualify for this credit is January 1, 2009.
To qualify for the credit given to long-time home owners, you must have owned your current home for any five five year period during the eight year period ending on the date of purchase of the new home. The earliest home purchase date to qualify for this credit is November 8, 2009.
For either credit, if your date of purchase is in May or June 2010, you will need to prove you entered into a contract to buy the house before May 2010. Read below to determine what documentation is necessary.
Members of the military and the “intelligence community” have an extra year to purchase a house and qualify for the credit.
Restrictions for qualifying for the credit
Even if you qualify as a first-time home buyer or a long-time home owner and you have purchased a qualifying house within the permitted time frame, you might still not qualify for the credit. You will not qualify if:
- you purchased your house after November 6, 2009, the price of the house may not be more than $800,000
- your modified adjusted gross income is $95,000 ($170,000 if you are married filing jointly) or more and you purchased your house before November 7, 2009. A phase-out of the credit begins with a MAGI of $75,000 (or $150,000)
- your modified adjusted gross income is $145,00 ($245,000 if you are married filing jointly) or more and your purchased your house after November 6, 2009. A phase-out of the credit begins with a MAGI of $125,000 (or $225,000)
- someone else claims you as a dependent on their tax return
- you purchased your house after November 6, 2009, and were under the age of 18 on the date of purchase
- you are a nonresident alien
- your house is located outside the United States
- you sell your home or it ceases to be your main residence before the end of the year in which you purchase it
- you received the house as a gift or inheritance
- you acquired your home from a relative or a related corporation or partnership
The amount of the credit
First-time home buyers qualify for a credit of 10% of the purchase price up to a maximum of $8,000 ($4,000 if married filing separately). Long-time residents qualify for a credit of 10% of the purchase price up to a maximum of $6,500 ($3,250 if married filing separately). As mentioned above, if your modified adjusted gross income is above a certain level, the credit will be phased out until eliminated entirely.
How to claim the tax credit
Because the IRS requires additional documentation, taxpayers who wish to claim the home buyer tax credit must file federal tax returns on paper through the mail. You can, however, still use tax preparation software like H&R Block At Home (formerly TaxCut), TurboTax, and TaxAct to calculate your taxes and complete your return, but you will need to print the paperwork and send it in.
I confirmed this with the TurboTax team:
Yes, TurboTax will stop taxpayers who have claimed the Homebuyers Credit from e-filing and let them know that the IRS requires them to print and mail their return with the appropriate documentation.
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. Alternatively, prepare your taxes online, ensuring your answer questions about your home purchase correctly.
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 — include 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.
Be sure to send copies of these forms, not the originals.
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.
Good luck! Let us know about your experience claiming the tax credit or if you have any questions.
Updated March 21, 2011 and originally published January 23, 2010. 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.
Rank: Platinum
{ 140 comments… read them below or add one }
← Previous Comments
Can you tell me when filling the 1040X on line 14; do you include the credits already filed on the original 1040 form?
We filed for the first time homebuyer tax credit on February 15, 2010. We still have not received it. Every time I call to see what the status is, they tell me it is “under review” and give no reasons why. I know that we qualify as I have read and understand the specifics. Our tax accountant also doesn’t understand why its taking three months. Will the IRS pay interest on this money if we get it? Anyone else experiencing this?
Did you receive yours yet, Jenny? I have been waiting three months at this point and when I called to check the status they still said “under review.” There doesn’t seem to be any kind of way to move this process along that I’ve discovered and that’s pretty frustrating.
I qaulify for the fthb credit but have been denided. I called the irs and the phone rep went through what he could and reconfirmed that I do indeed qualify and he resubmitted it. I’ve since gotten another letter wanting anther 45 days for research. they think I own another house somewere. I told them to give me an address, maybe this supposed place I own is nicer than mine, they didn’t think that was funny. Anyways I’m stiull in limbo on it. I filed Feb 2nd and I’m still waiting.
Brian,
I am going through the same thing. I have to say, the woman I talked to was very nice and told me exactly what I needed to submitt. I am expecting a delay, however I think it will be worth it in the end. I have to respect what they are doing, from what I read about all the fraud from the first round, its no wonder they are being so diligent.
I lived with my sister for several years, as a non paying guest, in her manufactured home, in a park where she paid rent for the space. She developed cancer and died in a very short time (within days of being hospitalized), she made a gift of the mobile home to me, while she was alive, not as part of her estate, so I could sell it –the space rent alone was twice my Social Security disability check. I sold it within a couple of months, but had packed up and was not actually residing there, but betwixt and between while trying to get packed and moved. I sold it and some months later bought a home in another state. I have never owned any home before and qualify on all counts, date, income, etc., but the question has come up as to whether or not I have owned a previous home because of the mobile home my sister gave me, but that I never actually used as a primary residence –at least in so far as I would think of actually living someplace (I spent most of the time before I got it sold trying to keep the park owner from taking a lean out on it in –I couldn’t pay the rent until it sold). So, do you think I’m a first time home buyer or not? I can’t seem to find an answer to this and the IRS is not being at all helpful, so far. Thanks for any response you may be able to give (especially tips on how to get a definitive answer to this).
From my discussion with the IRS, the fact that you did not own a home that was your principal residence would make you a first time buyer.
I also found this definition of first time home buyer on a Website sponsored by the National Association of Home Builders (http://www.federalhousingtaxcredit.com/faq1.php#2):
“The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.
For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, IRS Notice 2009-12 allows unmarried joint purchasers to allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.”
The last statement seems to apply to you — that ownership of a property not used as a principal residence does not disquaIify a buyer as a first-time home buyer.
I would certainly apply for the credit.
Thanks DB, I’ll do that. When I find out how it turns out I’ll report further.
Thanks again.
I’m having trouble finding out if i would be considered a first time homebuyer or not. In early 2006 I bought a house with my current fiance, I never made any payments on the mortgage on the home. In April of 2006 i moved out of the home and have not lived there since. I have not made any payments on the home and it has not been my primary residence since 2006, because of the issues with refinancing i have not been able to get my name off of the home as of today. Me and my husband now are buying a home and are closing on it june 14th so my question is would we beable to claim the first time homebuyers tax credit even though my name is still on the other house? Also how would i prove to the IRS that the house has not been my primary residence?
Thanks
Just a fix to my previous message, my husband now is not who i bought the previous house with.
Does anyone know? I signed my contract before the april deadline but I am not going to make the june 30th. I currently work overseas as a security contractor working under a contract with the state dept. Does anyone know if that qualifies me for the military extension into 2011, is say foriegn service empoyees and under that on the actual document it say Forein Service support personnel, would that be me? I am not an employee of the state dept. I am just a contractor working under the State Dept.
I amended my 08 taxes August of 2009. It has been ten months since I have applied. Our paperwork has been amended twice, and each time you get amended it takes 12-15 weeks for a reply. Our last paperwork consisted of our final appraisal report which we had to send in replace of the certificate of occupancy. We don't recieve those types of certificates outside the city limits. We are in high hopes to recieve a check within two weeks…Ha! Could it really be true!! The IRS is making sure that we have every piece of paperork correct and who knew it would take three to four months to correct paperwork….but it does….All I can say is make sure you send in any and all paperwork that you can the first time. It's crucial to a timely return.
I amended my 08 taxes August of 2009. It has been ten months since I have applied. Our paperwork has been amended twice, and each time you get amended it takes 12-15 weeks for a reply. Our last paperwork consisted of our final appraisal report which we had to send in replace of the certificate of occupancy. We don't recieve those types of certificates outside the city limits. We are in high hopes to recieve a check within two weeks…Ha! Could it really be true!! The IRS is making sure that we have every piece of paperork correct and who knew it would take three to four months to correct paperwork….but it does….All I can say is make sure you send in any and all paperwork that you can the first time. It's crucial to a timely return.
If my boyfriend and I are buying a house together and its in both our names, do we both need to claim the $8,000 credit together or can just one of us claim it? Also, I already filed my 2009 taxes, to claim the credit do I need to do an addendum? If so, how do I do this and what forms do I need?
Thanks!
What if we already filed our taxes in April and closed on our home in May (with it going under contract in March). Can we still claim the refund for 2009?
What if we already filed our taxes in April and closed on our home in May (with it going under contract in March). Can we still claim the refund for 2009?
Yes, you can however you must file an amended return. This process has been excruciatingly lengthened by the high demand for the tax credit. Most documentation on the IRS website says 8-12 weeks for an amended return to be processed. That has been extended to 12-16 weeks now. It’s sooner than filing in 2010, but it will take some time.
My wife has owned her home for eight years now and we have both been living there. I am not on the title or the mortgage of that home. Recently, I purchased a new home but she is not on the title or the mortgage of that one. We do file taxes jointly. Would we be eligible for the 6500 tax credit?
I am trying to claim the credit on my 2009 tax return for a house purchased in 2010. I originally filed a 1040EZ form because I had no other deductions. Since you cannot claim the credit on the 1040EZ form, is the 1040X enough to amend my original return for purposes of claiming the credit? I assume this is the case, just looking for confirmation.
I filed my 1040 for 2009 on Feb 15 2010. It took 16 weeks for the IRS to process my paper return. The IRS denied my $6500 Home Buyers Tax credit for an invalid reason. They claimed I had a prior home ownership which made my claim ineligable. I had owned my prior residence for 9 years prior to buying the new one on 22 Dec 2009. I sent the home purchase closing statement and 6 years of 1098′s. I claimed the correct amount, used the proper form 5405, entered on my 1040 in the appropriate line and attached the supporting documentation. I am now in the process of writing them following several telephone calls to thier office. I qualified as a long term resident but the credit and it was disallowed in error. All this means is, the credit is not easy to get. I am sure I am not the only one in this situation.. Despite this, my research shows that prisoners in jail have obtained the credit. I am getting the credit or I am going to court. I will get it, it is just not going to be easy !
I purchased a townhome in 2010 and signed a binding contract before May 1,2010 and closed the home before June 30,2010. I’m married filing jointly status and my wife hadn’t signed the purchase contract, but she signed the HUD-1 Settlement statements and we have deeds on our names.
We are first time home buyer, as per 5405 form instructions we need to send both the contract and HUD-1 settlement documents and it says it requires signatures of all parties, but wife didn’t sign the contract and signed only the HUD-1 . Will i get $8000 credit or will IRS reject it on the basis of signatures missing on contract.
Why is it that there are no exceptions to getting the credit regarding buying from a related person? I understand that many people have taken unfair advantage of this buyer credit and so rules were needed for that purpose; however, what about those situations were a person buys a first home as primary residence from a related person through appropriate channels and at market value? I’m failing to see where there was an advantage in anyway..?
This is the case with me; I bought my parents house at market value in March of this year; it was their primary residence, they bought a new home, put it on the market and so I purchased it. I went to submit the paperwork to claim the credit and found out that Im inelgible. This also shocked both my real estate lawyer and mortgage broker as well. I also talked to my accountant and he said had I purchased the home before the extension, I would have got it. This frustrates me greatly that the only difference from me being elgible is that the seller of the home I purchased has the same last name..there are no finacial ties what so ever!!! Any insight regarding this..?
We are in the same boat. We don’t even have the same last name as my husbands grandmother. I don’t know how the IRS would know if we sent in a claim, but I can’t bring myself to risk it. We did however purchase before the extension. Does that mean we could actually qualify?? Either way I think were screwed my friend…
I finally got mine after 6 months. I tried claiming it first through my regular tax return. Got denied, they said I owned a place somewhere when I’ve never owned any property ever and bickered with them for a month. I finally talked to a rep that would at least acknowledge my existence. After setting up some notes and reapplying through a second ammended return and another 10 weeks of waiting I got a deposit in my checking account
My son (first time homeowner) put a contract on a house 4/28, 2010. Problem was it didn’t appraise it until first week of May and it didn’t appraise and owner wouldn’t come down on price so we were released from contract only to find another house right away on May 18,2010. We went to settlement 6/30/2010. My questions is can he claim the credit because he did go to contract on a house before 4/30, it just wasn’t the one he closed on before 6/30. I was wondering if I put both contract in the amended 2009 return and the HUD-1 statement could he get the credit
My family lived in a mobile home located in a park before we purchased our new home November 17, 2009. I had talked with the IRS on three separate occasions and was told that to be eligible for the First Time Home Buyers Credit I had to call the City offices of where I lived and find out if they considered my mobile home to be a permanent structure or not. If they did not consider it to be a permanent structure then I could claim the First Time Home Buyers Credit; the full $8,000 dollars. I was told this by two different IRS representatives. I’m kind of surprised that you were told something totally different when you called them. My husband and I filed our amended return for the full amount based on what we were told by the IRS themselves. If we filed wrong, then it was based on their own faulty information.
My Mom is the executrix of my Grandmom’s estate. We bought my Grandmother’s house from the estate. Is this considered buying from a relative ? My Grandmom is dead and my mom does NOT own the house.
yes that is buying from a relative
My daughter bought a house in April 2010 and tried to claim the $8,000 tax credit on her 2009 taxes. I did not realize that I could not claim her on my taxes for 2009 and as a result, she will not receive the credit, even though she bought the house. Can I refile my taxes, remove her, and she refile hers, claiming herself, and fix the problem so she gets her $8,000?
yes, he can get 8,000 tax return. I have the same problem with your son. I had the contract before April 30, and I closed my house on June 30. That is fine. but if you had the contract after April 30, you wont take it.
Same thing happenening to us…How did you prove that you did not own a house somewhere else? What sort of documentation was required?
Sounds like us! We were sent a letter asking us for specific documentation for our home purchase last October. We sent in the proper docs and then they said we had a prior homeownership, which we did not! What docs did you need to turn in to prove you did not own anything in the past 3 years?
Sooo, I’ve sent responses to a few people above, but noticed that their posts were some time ago…wondering if anyone has any advice on EXACTLY what documentation you need to turn in to prove that you did NOT have a prior homeownership??????? They have denied us stating that we have a prior homeownership, which we didn’t. We had rented the entire 7 years we were together
until Oct. of 2009, as we were waiting for the market to mellow out to purchase. Now we are getting the runaround….it’s very frustrating. I understand that they need to be cautious, it’s just frustrating for us honest folks out there!!!!!!!!!!!!!!!!!!!!
Almost 3 months from the date of my first post here (5/25/2010) I received my rebate – on 8/26/2010 it showed up in my bank account. The number of phone calls, ever more information requests, and so on, was almost beyond belief. Every person I talked to on the phone was very nice and said variations of ‘Oh, I see the problem, it’s an error in (insert host of things like transposed number in SSN, etc.), I’ll fix that right now’… followed by yet another letter from some one else denying the claim for yet another non existent problem requiring further documentation, or harder trying to explain how hard it is to prove a negative –how does one prove they don’t have a husband named ‘we can’t tell you that’ who owns property in some unspecified place (can’t tell you that either)?. But I did finally get the money – they even added on another 106.23 dollars (for which I have no explanation, maybe interest?). While I did get the money I’ve never received any follow up correspondence explaining the extra money, or anything else. Well that’s OK, as I hope never to have to go through that sort of confused mess again. Still it was no doubt worth it, as I did get the money –but I’m left with the feeling it may have been as much serendipity as any actual coherent review process. Good luck to all, I hope your issues get resolved in your favor –but I wouldn’t expect it to be fast…
Hi,
Does anyone know if I can claim the credit for first time homebuyer? I have never purchased a home but my husband is the Trustee/Beneficiary of his mothers account.
I can’t seem to find any info on it. Thanks
TO Paul I have one better than that! We bought a City-owned home and moved in early because of the delays in closing, (29 Jan 2010). Well, when we did our 2008 taxes, I put in a change of address (didn’t want our refund to go where we weren’t!), so, that was their 1st excuse to review. Now we are on excuse #4. And you are a first time homebuyer and entitled to the credit.
Did you get your refund? I was just disallowed because I owned a single-wide in a park.
Unfortunately, I can’t qualify for the current homeowner credit either because I sold the mobile home over a year ago. Supposedly there can’t be a gap in ownership.
I am mistaken. You can get the current homeowner credit if you lived in the home 5 consecutive years out of the previous 8 years.
She can probably get it when filing her 2010 tax return along as you do not claim her as a dependant.
← Previous Comments