First time home buyers, Interest Rates, Loan Information

Homebuyer Tax Credit and IRS Form 5404

Fairfax, Virginia:

The Worker, Homeownership, and Business Assistance is the larger bill that included the homebuyer tax credit additions. Taxpayers wanting to take advantage of the first time home buyer credit (up to $8,000) or the new repeat home buyer tax credit (up to $6,500) can now get the revised IRS form 5405 to submit with their 2009 tax filing from the IRS website. Existing northern Virginia homeowners have been waiting for months for the revised form and instructions for months. The revised form is now posted on the IRS site. http://www.irs.gov/pub/irs-pdf/f5405.pdf – Please verify with your tax professional this is indeed the form you need.

Revised Form 5405 & Proof Needed for Federal Tax Credit

How much?

• First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers that have a ratified contract on or before April 30, 2010 and close before July1st, 2010.
• 10% of the sales price up to maximum of $8,000 and $6,500 for current homeowners that meet the guidelines on home purchases up to $650,000.

Who is eligible?

• A “first-time home buyer” is defined as a buyer who has not owned a principal residence during the three-year period prior to the purchase. Married taxpayers, the homeownership history of both the home buyer and his/her spouse. If one spouse has owned a principle residence in the past three years, the credit cannot be taken.
• For unmarried joint purchasers, IRS Notice 2009-12 allows to allocate the credit amount to any buyer who qualifies as a first-time buyer. For example, a parent might help their child buy a home. Or two people buy a home together where one has not owned a home and one has. The credit can be taken by the eligible Ownership of other properties, such as a vacation home or rental property that was not used as a principal residence in the past three years does not disqualify a buyer as a first-time home buyer.

Special rules for people in the military

• People serving in the military on extended duty outside the U.S. for 90 days or more have an extra year, through June 2011, to buy a house and claim the tax credit.

 

Income:

First-Time Homebuyer Tax Credit Income Limits (Modified adjusted gross income)
Filing status	Date of purchase	Full credit income limits	Partial credit* income limits
Single or Head-of-household	Before Nov. 7, 2009	less than $75,000	$75,000 to $95,000
	Nov. 7, 2009 or later	less than $125,000	$125,000 to $145,000
Married filing jointly	Before Nov. 7, 2009	less than $150,000	$150,000 to $170,000
	Nov. 7, 2009 or later	less than $225,000	$225,000 to $245,000

1. What is “modified adjusted gross income”?
   Modified adjusted gross income (MAGI) as defined by the IRS.

 a)      First determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before Schedule A itemized deductions or personal exemptions are subtracted.

b)      AGI can be found on forms 1040 and 1040A tax form, is the last number on page 1 and first number on page 2.

c)      AGI on the 1040-EZ tax form, AGI appears on line 4.

d)      AGI is inclusive of all types of income received including wages, salaries, interest income, dividends and capital gains.

2.  There are partial deductions available for higher incomes, but they fall off dramatically.

For further information please review the IRS site and as always consult your tax professional. See IRS Form 5405 for more details on completing the tax credit.

Documentation Needed for First-Time Home Buyers

First-time home buyers must provide the IRS with proof of purchase. The IRS indicates that one of the following documents must be attached in order for a federal tax credit for home purchase to be processed correctly:

• Copy of Form HUD-1 (Settlement Statement) or similar document that shows all parties’ names and signatures, the property address, sales price, and date of purchase.
• Copy of the executed retail sales contract (in case of mobile home purchases) that shows the same information.
• Copy of the dated certificate of occupancy (in case of new construction) that shows the owner’s name and property address.

Additional Proof Required for Existing Homeowners

Existing homeowners are eligible for a $6,500 tax credit if they have lived in their old house for five consecutive years out of an eight-year period ending on the purchase date of the new house. In addition to the documentation requirement above, taxpayers who fall into this category must also provide proof of the five-year residence with mortgage interest statements, property tax records, or homeowner’s insurance documents.

Useful links

These links are external links that we have found useful. The links provide information some are duplicates, but each has their own point of view expressed to support their companies mission.

 From Realtor.com

Detailed information about the extended homebuyer tax credit, including

1. The Basics: Extended Home Buyer Tax Credit 2009/2010
2. How to Get the Extended Home Buyer Tax Credit
3. In-Depth: 2009 First-Time Home Buyer Tax Credit
4. American Recovery and Reinvestment Act of 2009
5. Comparison of the 2008 and 2009 first-time homebuyer tax credits.

From the National Association of Homebuilders.

Home Buyer Tax Credits – First-time homebuyer tax credit and the repeat buyer

From The IRS:
  1.  First-Time Homebuyer Tax Credit
  2.  First-Time Homebuyer Credit