Changes to Homebuyer Tax Credit

The government has provided a great tax savings strategy via the First Time Home Buyer Tax Credit. Here is a brief background on the extended First Time Home Buyer Tax Credit. Taxpayers must enter into a binding contract to buy a principal residence on or before April 30, 2010 and officially close on the home by June 30, 2010. For those that qualify as a first time homebuyer they are eligible for a refundable credit . The actual credit is based on 10% of the home purchase price up to a maximum of $8,000. Therefore, any home purchased for more then $80,000 will receive the maximum credit of $8,000. It is important to note that anyone can be considered a first time homebuyer provided that they have not owned a principal residence for three year period prior to the home purchase.

In November 2009 the government expanded and extended the First Time Home Buyer Tax Credit, but did also added some new documentation requirements in order to qualify for the credit. Anyone claiming the First Time Home Buyer Tax Credit will want to make sure and complete Form 5405 and include it with their personal tax return. In addition, you will be expected to attach a copy of your closing/ settlement statement. Generally, the closing statement will be the Form HUD-1 statement that will be provided to you at the time of the closing. It is also recommended that you make sure all appropriate signatures have been included on the closing statement. It is important to note that as a result of these documentation requirements individuals claiming the First Time Home Buyer Tax Credit will be ineligible for electronic filing of their tax return. Lastly, please remember that even if you purchase the home in 2010 you can actually elect to accelerate receiving your tax refund by including the home buyer credit on your 2009 tax return.