First we’re assuming that everyone who qualified for the tax credit last year knows that they could have filed an amended return as soon as they closed on their new home. And if they did that, they probably already have their tax credit. But for everyone else, they’ll have to file for it on this year’s tax return. So we wanted to make sure you know how to properly claim that credit in your tax return before it’s too late.
The first-time home buyers’ tax credit for 2010 was worth ten percent of the cost of the home, up to a cap of $8000. It does not have to be repaid, as long as the buyer lives in the home for at least three years after the date of purchase. If you end up selling the home earlier than that, you will have to pay back the government the entire credit, so keep that in mind.
That program was for first time home buyers. But it was soon followed by an expansion of the program, for existing homeowners who bought a replacement home. That program, which had terms similar to the credit for first-time buyers, had a maximum credit of $6500.
Both of tax credits required buyers to sign contracts for their homes by the end of April, 2010, and to close on those homes by the end of September, and the credits were subject to income limits and other restrictions as well. Single homebuyers, for example, had to have incomes of less than $125,000 to qualify for the full credit, while married couples had a $225,000 income limit.
But still – for the vast majority of homebuyers in the first half of last year, the credit will essentially wipe out up to $8000 of your tax liability for 2010.
Of course, if you want to collect that money, you’ll need to make sure you properly submit a claim in your 2010 tax return.
Now here’s the important part.
To get the tax credit, you’ll need to submit a 1040 form, along with federal form number 5405 and you can download these on the IRS website. You’re also going to need to attach a copy of your settlement sheet, also known as a “HUD-1” form, to prove that you actually bought a home within the proper time frame in 2010.
For better or worse, and we really believe better, the federal homebuyer tax credit program defined 2010 in residential real estate. It brought a spark to the housing market last winter and generated millions of sales in the spring that served to drain away a lot of excess inventory, and, in turn, allowing prices which had been falling since the beginning of the nation’s financial crisis to stabilize.
Feel free to reach us any time….we are happy to help!
The Tim Sova Team
Tim Sova, Associate Broker/Listing Specialist
Connie Lemley, Realtor/Buyer Specialist
Colleen Sova, Client Care Specialist
Source: RET, Real Estate Today Radio
