July 14, 2010
What's new from the IRS

First-time home buyer credit extended

The government has extended the first-time home buyer credit.

If you signed a contract to purchase a home before May 1, you now have until Sept. 30, 2010, to complete the closing and qualify for the $8,000 first-time home buyer credit or the $6,500 credit for long-term homeowners.

The first-time home buyer credit is equal to the lesser of $8,000 ($4,000 for a married individual filing separately) or 10 percent of the purchase price of a principal residence. A long-term homeowner may claim a credit if the buyer (and the buyer's spouse, if married) maintained the same principal residence for any five-consecutive-year period during the eight years ending on the date of purchase. The maximum credit is the lesser of $6,500 ($3,250 for a married individual filing separately) or 10 percent of the purchase price of the home.

The credits phase out over modified adjusted gross income levels of $125,000 to $145,000 for individuals and $225,000 to $245,000 for those filing a joint return. Also, the credits cannot be claimed for a home costing more than $800,000. Dependents cannot claim the credits, and a purchaser must be at least 18 years of age on the date of purchase.

To claim either credit, you must complete Form 5405, First Time Homebuyer Credit and Repayment of the Credit, and include with your tax return one of the following documents:

• A copy of the settlement statement showing all parties' names and signatures, property address, sales price and date of purchase. Normally, a home buyer will submit a properly executed Form HUD-1, Settlement Statement.
• For mobile home purchasers who are unable to get a settlement statement, a copy of the executed retail sales contract showing all parties' names and signatures, property address, purchase price and date of purchase.
• For a newly constructed home when a settlement statement is not available, a copy of the certificate of occupancy showing the owner's name, property address and date of the certificate.

If the purchase date is after April 30 and before Oct. 1, 2010, you should also attach a copy of the pages from the signed purchase contract showing all parties' names and signatures, the property address, the purchase price and the date of the contract.

For qualifying purchases in 2010, you have the option of claiming the credit on either your 2009 tax return or your 2010 tax return.

Read more in IRS Information Release 2010-080.

Contact our firm if you have any questions or comments about this article.

The technical information here is necessarily brief. No final conclusion on these topics should be drawn without further review and consultation. Please be advised that, based on current IRS rules and standards, the advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty assessed by the IRS.

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