MOUNTAINSIDE – More than 36,000 New Jersey homebuyers already have collected nearly $249.1 million in First-Time Homebuyer Credits.As the deadline draws near, the Internal Revenue Service reminds potential homebuyers that they must have a binding contract to purchase a home by April 30, 2010 and must close on that home by June 30, 2010 to qualify for the First-Time Homebuyer Credit.
“This is a sizable tax credit. It would be unfortunate for any potential homebuyer to leave this money on the table simply because they missed the deadline,” said Gregg Semanick, IRS spokesperson. “If you’re in the market, build your timeline accordingly to take advantage of this credit.”
Nationally, through mid-February, nearly 1.8 million Americans had filed returns to collect $12.6 billion in tax credits for homes that they purchased in 2008 and 2009.
The First-Time Homebuyer Credit provides up to $8,000 for taxpayers buying a new home if it is their first home or if they have not owned a home in the three years before the date of purchase. Legislation in 2009 expanded the credit to include long-time residents who purchase a new main home after Nov. 6, 2009. To qualify for this version of the credit, which is a maximum of $6,500, eligible taxpayers must show that they owned and lived in their old home for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home.
For married couples, both spouses must qualify in order to claim the credit. Income limits apply for single and married taxpayers. Buyers who purchased homes through Nov. 6, 2009 may qualify for the full credit if their modified adjusted gross income is $75,000 or less ($150,000 for joint filers). For purchases Nov. 7, 2009 or later, the full credit is available with MAGI up to $125,000 ($225,000 for joint filers). The credit is reduced for higher incomes and eventually phases out.
The credit is fully refundable, meaning eligible taxpayers will be paid the credit even if they owe no tax or the credit is more than the tax owed.
How to Claim the Homebuyer Credit
Taxpayers claiming a homebuyer credit must file a paper return and attach Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, with additional documents to verify the purchase. Although these taxpayers cannot file electronically, they can use IRS Free File or other tax-preparation software to prepare the return, which they can then print and mail to the IRS, along with required documentation.
Qualifying buyers who purchased a home in 2009 could claim the credit on their 2008 or 2009 tax return. Qualifying taxpayers who purchase in 2010 have the option of claiming the credit on either their 2009 or 2010 tax return.
Documentation to Include With the Tax Return
Taxpayers who entered into a binding contract by April 30, 2010 to purchase a home by June 30, 2010 should attach a copy of the pages from the signed binding contract to make a purchase. Binding contracts should show all parties’ names and signatures, the property address, the purchase price and the date of the contract.
Homebuyers must attach a copy of a properly executed settlement statement, such as the HUD-1 form, for their purchase. These statements can vary by geographic area and local law and typically are not available for the purchase of a newly constructed home or a mobile home. For guidance on document requirements for these purchases, the IRS has prepared a Special Edition IRS Tax Tip 2010-05 that is available on the IRS.gov web site.
The IRS recommends that taxpayers claiming the $6,500 credit for long-time residents buying a new main home attach documents that verify the five-consecutive-year period of homeownership such as Form 1098, Mortgage Interest Statement or substitute mortgage interest statements, property tax records or homeowner’s insurance records.
Additional Time for Members of the Military
Members of the Armed Forces and certain federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and still qualify for the credit. Individuals who are eligible for this extension must enter into a binding contract to buy a home no later than April 30, 2011, and settle on the purchase by June 30, 2011.
For more information about the First-Time Homebuyer Tax Credit and the documentation requirements, visit IRS.gov/recovery.
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