You’ve decided to purchase a home and take advantage of the Extended Home Buyer Tax Credit. Many Congratulations!!! Here’s what you have to do to get your tax benefit:
1. Close on your home purchase between November 7, 2009 and April 30, 2010, or have a binding, written contract by April 30, 2010 and close by July 1, 2010.
2. Decide whether to:
* apply the credit to your 2009 tax return, filed on or before April 15, 2010;
* file an amended 2009 return; or,
* apply the credit on your 2010 return, filed on or before April 15, 2011.
3. Attach the documentation of purchase to your return.
The Documentation of Purchase
Home buyers must attach a copy of the closing statement (specifically called the HUD-1 or settlement form) to the IRS Form 5405
as the evidence that the home purchase was completed and that is was within the dates specified. In some cases, a HUD-1 form may not have been used (sometimes with new construction). In those situations you should attach a copy of the certificate of occupancy in lieu of the HUD-1.
If you can not find your copy of the HUD-1 from the documents you received on the day of closing, contact your Realtor® for help.
When to Apply the Credit
Buyers purchasing homes on or before December 31, 2009 may claim the credit on their 2009 tax returns.
Buyers purchasing in 2010 will have the option to:
* Claim the credit on their 2009 return, even if the purchase is completed after December 31, 2009;
* File an amended return for 2009 if their purchase is completed after April 15, 2010; or,
* Claim the credit on their 2010 tax returns.
Applying the Home Buyer Tax Credit to Your 2009 Return
To claim the credit as part of your 2009 return, you will need: The standard Form 1040 and Form 5405
for the home buyer tax credit.
1. First begin Form 1040.
2. Be sure to take note of your adjusted gross income from the Form 1040, which you will then enter on lines 37 of the Form 5405
. (Form 5405 actually requires you to note your modified adjusted gross income, but that affects few people, so most will just use their adjusted gross income.)
3. When you come to Line 69 of the Form 1040 you’ll be asked to enter your tax credit amount. To do that, you’ll need to first complete Form 5405.
4. Once you complete Form 5405, enter the amount on Line 69, then complete your return.
5. Attach Form 5405
with the HUD-1 to your return (Form 1040).
Determining Your First-Time Home Buyer Credit Amount: Form 5405
This form (IRS Form 5405
) has just six lines and takes only a minute to complete.
1. On the first line enter either $8,000 or 10 percent of the home purchase price, whichever is smaller.
Since the national median home price is around $175,200 (March 2009), in most cases the $8,000 will be the smaller of the two. In order for 10 percent of the home price to be smaller, the home purchase price would have to be $79,999 or less.
2. On the second line enter your adjusted gross income.
You will find your gross adjusted income on Form 1040. (The tax credit form actually requires you to note your modified adjusted gross income, but that affects few people, so most will just use their adjusted gross income.)
3. If your adjusted gross income is more than $75,000 (individual) or your income is more than $150,000 (joint) you’ll have to complete some additional calculations to determine the credit amount for which you qualify.
Everyone else will simply enter the tax credit amount on Line 6.
Collecting Your Refund
Any refund for which you qualify will be sent to you.