The Federal Home Buyer Credit has now expired for the general population , but active armed forces members are still eligible for this credit until September 2011. Here are more details about the credit and how to claim it in your 2010 tax returns.
The $8,000 (new) /$6500 (existing) home buyer credit has been extended 4 times already on increasingly favorable terms, dating back to the Bush presidency, and has helped thousands of families buying homes. While there has been some degree of fraud, this credit has been one of the most successful stimulus payments the Obama administration has implemented to stem the housing and financial crisis.
However. with home prices stabilizing in most markets it is highly unlikely the credit will be extended again into 2011, despite the pleas of many home buyers who just missed the cut-off (April 30th to qualify, Sep 30th to claim). Some groups like Armed forces members and certain state department employees are still eligible for the credit into 2011, but for most home buyers going forward the credit is gone for good. One credit that is still available though is the $1500 home energy efficiency credit which can lead to lower energy cost savings over the medium to longer term.
Another challenge around the home buyer credit has been claiming it. With the flood of claims and various other stimulus driven credits and tax breaks the IRS has been slow in processing this credit. 2-3 months is the average wait for most people. But you can save yourself some time by submitting the right documentation when you adjust your 2009 or file your 2010 tax returns (in 2011). Form 5405 is the official IRS form required to claim the credit and all eligible home buyers must also include with their tax return one of the following documents (better to include more than less documentation if you are unsure):
- A copy of the settlement statement showing all parties’ names and signatures if required by local law, property address, sales price, and date of purchase (before April 30th 2010 to be eligible for the credit). Normally, this is the properly executed Form HUD-1, Settlement Statement. For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy (from the county/city office) showing the owner’s name, property address and date of the certificate.
- Existing Home Buyers who qualify for this credit must show that they lived in their old homes for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home. This can be done by providing Mortgage interest statements, Property tax records or Homeowner’s insurance records
If claiming the credit in your 2010 tax returns (filed in 2011), most of the leading tax software like Turbo Tax will have step by step guides on claiming the credit in your return. There are three options for claiming the credit on a qualifying 2010 purchase:
- If a 2009 return has not yet been filed, claim it on Form 1040 for tax-year 2009. Though these returns cannot be filed electronically, taxpayers can still use IRS Free File to prepare their return. The returns must be printed out and sent to the IRS, along with all required documentation. The IRS urges taxpayers claiming refunds to choose direct deposit.
- If a 2009 return has already been filed, claim it on an amended return using Form 1040X.
- Whether or not a 2009 return has been filed, wait until next year and claim it on a 2010 Form 1040.
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