You’ve decided to purchase a home and take advantage of the Extended Home Buyer Tax Credit. Here’s what you have to do to get your benefit:
- Close on your home purchase between November 7, 2009 and April 30, 2010, or have a binding written contract in place by April 30, 2010 with a closing date no later than June 30, 2010.
- 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 documentation of purchase to your return.
When to Apply the Credit
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 Credit to Your 2009 Taxes
You will need to do three things to claim the credit on your 2009 tax return:
- Fill out Form 5405 to determine the amount of your available credit;
- Apply the credit when you file your 2009 tax return or file an amended return;
- Attach documentation of purchase to your return or amended return.
How do I obtain an IRS Form 5405?
How to Apply 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.
- First begin Form 1040.
- Be sure to take note of your adjusted gross income, which you enter on lines 37 of the form. 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.
- When you come to Line 69 you’ll be asked to enter your tax credit amount. To do that, you’ll need to first complete Form 5405.
- Once you complete Form 5405, enter the amount on Line 69, then complete your return.
- Attach Form 5405 to your return.
Collecting Your Refund
Any refund for which you qualify will be sent to you.
Determining Your First-Time Buyer Credit Amount: Form 5405
Regardless of whether you’re applying the first-time home buyer tax credit on your 2009 return or your 2010 return, you’ll need to visit the IRS Web site and download Form 5405: http://www.irs.gov/pub/irs-pdf/f5405.pdf . This form has just six lines and takes only a minute to complete.
- 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.
- On the second line enter your adjusted gross income. You will find your gross adjusted income on line 37 of Form 1040, which you submitted when you filed your 2008 return. 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.
- 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.
The information in this Blog was condensed from a recent NAR article. Please do not consider this article as income tax counsel and please verify the above information with your CPA or other Tax Advisor.