New Homebuyer Benefits: Claiming Tax Credit

The Housing and Economic Recovery Act of 2008 provided homeowners with a number of homebuyers' tax credits. This economic and housing recovery act provided tax credits of up to $8,000 for qualified first-time homebuyers, and up to $6,500 for other qualified homebuyers, for houses purchased before July 1, 2010.

Claiming the Tax Credit

Homeowners who plan to claim the homebuyers tax credit on their 2010 tax returns must meet a series of qualifications, including these:

• Tax credit income limits are $125,000 for single buyers and $225,000 for married couples filing jointly.
• They closed on their home on or before September 30, 2010.
• The home price cannot exceed $800,000.
• The homeowners have legal residency in the US.

Homebuyers who meet these qualifications can begin gathering paperwork to claim the credit on their 2010 tax returns.

Required Documentation for Claiming the Tax Credit

When filing your taxes, you must provide the following documentation in order to claim the homebuyers tax credit:

• IRS Form 1040. This is the income tax form homeowners file each year to determine how much they owe the IRS or the amount of the refund due.
• IRS Form 5405. This form helps homeowners determine how much of the tax credit they’re eligible to receive.

In addition, homeowners must provide qualifying documentation to prove their home was purchased within the dates of the tax credit extension. Acceptable documents include:

• Copy of Form HUD-1, Settlement Statement showing the parties’ names, home address, purchase price, and date of purchase
• Certificate of Occupancy (if settlement statement is unavailable) with names, property address and dates; generally for new construction
• Retail sales contract with names, dates and property address for mobile home purchases.

If you plan to claim the tax credit on your upcoming return, failure to provide the required documents can delay your homebuyers' tax credit.