Tag Archive for First Time Home Buyer Tax Credit
According to Cary A. Nievinski v. Commissioner TC Summary Opinion 2011-10 even though IRS Form 5405 and IRS Publication 4819 provide only general instructions and do not address all the rules and limitations applicable to the first-time home buyer credit, the apparent failure of some IRS publications to explain the “no-purchase-from-family” limitation of the first-time home buyer credit has no effect on the authority of §36(c). Failure to understand this does not provide a legal basis to allow you to claim the first time home buyer tax credit.
Many taxpayers who claimed the first time home buyer’s credit are having their tax returns examined by the IRS. Turns out generally that this credit is not being properly reported. Even tax practitioners are demonstrating incompetence when it comes to preparing, signing and filing tax returns of this nature. This is becoming a real mess and professional incompetence aside the fact is that this tax credit changed from year to year and can be difficult to not only understand but to also apply.
The Home buyer Credit was created by Congress in 2008 to help stimulate the housing industry by encouraging people to purchase their first homes. Subsequent legislation in 2009 and 2010 revised, extended and expanded the credit. The Home buyer Credit was a refundable credit that could result in a tax refund when the credit exceeded the tax liability, even if no income tax was withheld or paid so it facilitated fraud in all shapes and forms.
Each of the laws with Home buyer Credit provisions contain different Credit amounts, qualification requirements, and repayment requirements. Individuals who received the Home buyer Credit for a home purchased in 2008 are required to pay back the total amount received for the Home buyer Credit over 15 years beginning in 2010. There are some exceptions. In addition, individuals who received the Home buyer Credit in 2008, 2009, or 2010 generally must repay the entire amount they received, if, during the 3-year period beginning on the purchase date and after the year for which the individual received the home buyer credit, they dispose of the home or it ceases to be their principal residence. If the disposition is a sale, the repayment requirement is applicable to the extent there is a gain on the sale of the home.
Qualifying for the home buyer credit takes into consideration the taxpayer’s marital status separately and distinctly from the taxpayer’s filing status. In other words if you are married regardless if you file jointly or separately both spouses home ownership histories are taken into consideration when determining either spouse’s eligibility for the credit. Many good people misunderstood this, wrongly applied for the credit, and are now experiencing the consequences. The real hurt is coming when the IRS assesses the accuracy related penalty which seems to be happening with little degree of consistency.
There is still time to claim the First-Time Homebuyer Tax Credit on your 2009 tax return. If you purchased or entered into a binding contract to purchase a home in 2009 or early 2010, you may be eligible to claim the First-Time Homebuyer Credit. Claiming this credit might mean a larger refund. Here are 10 things the IRS wants you to know about the First-Time Homebuyer Credit and how to claim it.
You must buy – or enter into a binding contract to buy – a principal residence located in the United States on or before April 30, 2010. If you enter into a binding contract by April 30, 2010, you must close on the home on or before June 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. Additionally, your settlement date must be after November 6, 2009.
The maximum credit for a first-time homebuyer is $8,000. The maximum credit for a long-time resident homebuyer is $6,500.
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. Though you cannot file electronically, you can still use IRS Free File or tax-preparation software to prepare your return. The return must then be printed out and sent to the IRS, along with all required documentation.
If before May 1, 2010, you enter into a binding contract to purchase a home before July 1, 2010, and you are claiming the credit, attach a copy of the pages from the signed binding contract to make a purchase showing all parties’ names and signatures, the property address, the purchase price and the date of the contract.
New homebuyers must attach a copy of a properly executed settlement statement used to complete such purchase. Generally, a properly executed settlement statement shows all parties’ names and signatures, property address, sales price and date of purchase. However, settlement documents, including the Form HUD-1, can vary from one location to another and may not include the signatures of both the buyer and seller. In areas where signatures are not required on the settlement document, the IRS encourages buyers to sign the settlement statement when they file their tax return — even in cases where the settlement form does not include a signature line.
Buyers of a newly constructed home, where a settlement statement is not available, must attach a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.
Purchasers of mobile homes who are unable to get a settlement statement must attach a copy of the executed retail sales contract showing all parties’ names and signatures, property address, purchase price and date of purchase.
If you are a long-time resident claiming the credit, the IRS recommends that you also attach documentation covering the five-consecutive-year period such as Form 1098, Mortgage Interest Statement or substitute mortgage interest statements, property tax records or homeowner’s insurance records.
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