Many taxpayers who closed on a home last year are eligible to claim the $8,000 First-time Homebuyer Tax Credit on their 2010 federal taxes. While claiming the homebuyer tax credit is relatively straight-forward, filers will have to mind the filing requirements for claiming their first time homebuyer tax credit without undue delay.
First up, filers who purchased a home in 2010 will want to determine their eligibility for the credit as per legislative and IRS rules.
Major points determining qualification of the first time homebuyer tax credit are:
• Your home purchase had to go into contract on or before April 30th, 2010 and had to have closed on or before September 30th of that year. You also had to have purchased the home as either a first-time or long-time homebuyer.
• First-time homeowners, for the purpose of the credit, are defined as individuals who have never owned a home, or who have owned a home previously, but not as their principal residence in the 3 years preceding the qualifying purchase.
• “Long-time” homebuyers—those eligible for a $6,500 credit—are those who owned a home for at least five consecutive years in the eight years prior to purchase.
• Certain income limitations apply. These depend upon your specific date of purchase, and are pegged to your “modified adjusted gross income”, which is simply your adjusted gross income plus any tax-free foreign income you may have received. For more information, visit our Repaying the First Time Homebuyer Tax Credit article.
Once you’ve determined your eligibility, you can start planning to take the credit on either your 2010 taxes, or as an amendation to your 2009 return.
Like to e-file? Sorry. To claim the homebuyer tax credit, you’ll have to file a paper return, in order to include the documentation needed to verify your home purchase. Paperwork needed depends upon your qualification as a first-time or long-time buyer, but generally includes settlement statements for proof of purchase, and mortgage interest statements for proof of previous homeownership. Again, you can check with the IRS for details about documentation you will be expected to supply.
Don’t have to pay taxes this year? Congratulations! The First-time Homebuyer Tax Credit is refundable, meaning that the federal government will reimburse you for the value of the credit as a refund. For those who do have tax liability, the credit will either reduce that liability, or be issued as a refund if your payroll withholding already covered your taxes due.
Lastly, because life is life, and no two situations are identical, the IRS has pre-imagined a variety of scenarios that complicate the claiming of the homebuyer credit, such as marriage, divorce, filing status and death. You can read them all—and get answers on issues—at the IRS Homebuyer Credit Scenarios page.
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It’s good to see some awareness around credit to first time buyers, especially in the current climate we have seen significant drops of young people/FTB’s as there are simply very few on the ladder!