The clock is ticking on first-time homebuyer and repeat buyer tax credits

The first-time homebuyer and repeat buyer tax credits expire on April 30. As of this moment, there doesn’t seem to be a movement to extend these credits again.

But before you rush out the door to find a house, let me address three common myths related to the tax credits.

Myth: If you haven’t completely closed the deal by April 30, you’re cooked

Not entirely true. As long as you sign a binding sales contract by April 30, you have until June 30 to complete the transaction and qualify for either the $8,000 first-time homebuyer or $6,500 repeat buyer tax credits.

Myth: You’ll receive your tax credit as a check

I’ve seen questions posed on Internet forums along the lines of ‘When will I receive my 8000 new home buyer tax credit?’ and ‘How long before I receive my 8000 new home buyer tax credit check?’

Here’s the deal. Even if you buy a home in 2010, you can claim the first-time homebuyer or repeat buyer credit on your 2009 return. If you haven’t yet filed your 2009 return, great. If you did, you’ll need to file an amended return. Otherwise, you can wait until you file your 2010 taxes.

In most cases, the government doesn’t issue you a check. Instead, every dollar of the tax credit reduces your income taxes by a dollar. So if your total tax liability was $10,000, the $8,000 tax credit would bring your total tax liability down to $2,000.

So when does someone receive a check? If your total tax liability was $5,000, the IRS would send a qualifying first-time homebuyer a check for $3,000—the difference between the $8,000 tax credit and the buyer’s $5,000 tax liability.

Whether you’re applying for the first-time homebuyer or repeat buyer tax credit, you need to fill out and file the IRS form 5405 with your return. You’ll need to supply the IRS with documentation as well.

Myth: Any first-time homebuyer or repeat buyer is eligible for the tax credits, as long as they meet the deadlines

Sorry, but that’s not the case.

The home you buy has to be your principal residence. And it has to have cost no more than $800,000. There are also exclusions based on your modified adjusted gross income. For example: If your modified adjusted gross income is $145,000 or more, or $245,000 and up if married and filing jointly, and you bought your home after Nov. 6, 2009, you can’t claim either the first-time homebuyer or the repeat buyer tax credit.

The instructions to form 5405 spell out exactly who can, and can’t, claim the credits.

Here are some other resources:

The IRS website explains what you need to do to claim the credit.

The National Association of Home Builders has several informative pages on the tax credits.

“Planning ahead: What first-time homebuyers need to do to qualify for the federal tax credit”

“Top 3 tips for homebuyers in the new year”

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