Have clients claiming the first-time homebuyer tax credit this tax season? Pass along these tips from the Internal Revenue Service, on the forms and documentation they will need.
- The purchaser must have been at least 18 years old on the date of purchase; for a married couple, only one spouse must meet this age requirement. A dependent is not eligible to claim the credit.
- You must have bought—or entered into a binding contract to buy—a principal residence located in the United States on or before April 30, 2010. If you entered into a binding contract by April 30, 2010, you must have closed on the home on or before September 30, 2010.
- To be considered a first-time homebuyer, you and your spouse—if you are married—must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.
- To be considered a long-time resident homebuyer you and your spouse—if you are married—must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased.
- The maximum credit for a first-time homebuyer is $8,000, half that amount for married individuals filing separately. The maximum credit for a long-time resident homebuyer is $6,500. Married individuals filing separately are limited to $3,250.
- You must file a paper return and attach form 5405, First-Time Homebuyer Credit and Repayment of the Credit with additional documents to verify the purchase. Therefore, if you claim the credit you will not be able to file electronically.
- New homebuyers must attach a copy of a properly executed settlement statement used to complete such purchase. Buyers of a newly constructed home, where a settlement statement is not available, must attach a copy of the dated certificate of occupancy. Mobile home purchasers who are unable to get a settlement statement must attach a copy of the retail sales contract.
- If you are a long-time resident claiming the credit, the IRS recommends that you also attach any documentation covering the five-consecutive-year period, including Form 1098, Mortgage Interest Statement or substitute mortgage interest statements, property tax records or homeowner’s insurance records.
- Members of the military and certain other federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the credit. Download an informational flyer.
For more information about documentation and eligibility requirements for the First-Time Homebuyer Tax Credit, visit www.irs.gov/recovery.
Source: IRS Tax Tip 2011-27, February 08, 2011