Homebuyers have until April 30, 2010 to have a purchase and sale contract and must close by June 30, 2010 to be able to get the $6,500 and $8,000 tax credits.
So exactly WHO gets the $6,500 credit? Non-first time home buyers who have lived in their previous residence for at least five out of the last eight years but are selling that home and buying a new home by May 1st, 2010. The new home must be used as a primary residence. Repeat home buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit.
And exactly WHO gets the $8,000 credit? First time home buyers who purchase a home before May 1st, 2010. The new home must be used as a primary residence.
Any home owner who sells the newly purchased home or ceases to use it as a primary residence within three years of the purchase date must repay the credit.
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500. Purchases of homes priced above $800,000 are not eligible for the tax credit. The income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with income above those limits.
You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount. Please note that although the Form is titled “First-Time Homebuyer Credit,” this is the correct form for claiming both the $8,000 first-time homebuyer tax credit and the $6,500 repeat buyer tax credit. Home buyers must attach a copy of their HUD-1 settlement form (closing statement) to Form 5405 as proof of the completed home purchase.
Any home that will be used as a principal residence will qualify for the credit, provided the home is purchased for a price less than or equal to $800,000. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats.
For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be before April 30, 2010 (or by June 30, 2010, provided a binding sales contract was in force by April 30, 2010).
For a home purchase in 2009 or 2010, you can also choose whether to treat the purchase as occurring in the prior or present year, depending on in which year the credit amount is the largest. So, if the applicable income phase-out would reduce your home buyer tax credit amount in the present year and a larger credit would be available using the prior year amounts, then you can choose the year that yields the largest credit amount.
Two unmarried buyers can allocate the tax credit in any reasonable manner, provided neither claims a tax credit higher than the one they qualify for and the home purchase does not yield a total of more than $8,000 in tax credits. For example, the repeat home buyer could claim $6,500 and the first-time home buyer could claim $1,500. Alternatively, both buyers could claim a $4,000 tax credit.
We’re not hearing any talk of these deadlines being extended, so you need to get cracking and buy that home now..
Steven A. Feinberg – www.AppletreeBusiness.com – Get Appletree Blog via Email!
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