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Personal Tax -> First-Time Homebuyer Credit

First-Time Homebuyer Credit

The refundable First-Time Homebuyer Credit expired for most taxpayers for 2011.  Some military personnel and members of the intelligence community were still able to claim the credit in 2011 for qualified purchases.

First-Time Homebuyer Credit Repayment

The IRS is no longer mailing reminder letters to taxpayers who have to repay the credit, but they have an online lookup tool to check your repayment obligation.

First-Time Homebuyer Credit Tool

This tool  will provide account information to help you report your repayment obligation on your tax return.  You will need your Social Security number, date of birth, and complete address in order to use the tool.  If you file a joint return, you will only be able to access your own portion of the Homebuyer Credit account information.

The tool will provide you:

bullet the original amount of the credit
bullet annual repayment amounts
bullet total amount paid, and
bullet the balance left to be paid

You can print the information for your records, and for your tax preparer.

To add the repayment amount to your personal income tax return, report it on line 59b on Form 1040.  If you make an installment payment, you don't need to attach Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, to your tax return.  If you are repaying the credit because the home stopped being your main home, you must attach Form 5405.

Form 5405 and Instructions - from IRS website.

Prior information:

To qualify for the credit, you must have purchased a principal residence, or entered into a binding contract to buy one, on or before April 30, 2010, and closed on the home on or before September 30, 2010.  The credit was also extended to current homeowners who are long-time residents of the same home, and were purchasing a new home.

The new law also allows people with higher incomes to qualify for the credit.

There are also new benefits that apply to members of the military, Foreign Service and intelligence community serving outside the U.S.  See the IRS information on this.

To qualify for this credit:

bullet the purchase price of the home must not exceed $800,000, and
bullet the purchaser must be at least 18 years of age on the date of purchase, and
bullet the home must be located in the United States, and
bullet the home must be used as the taxpayer's principal residence, and
bullet the purchase must close after April 8, 2008 and on or before September 30, 2010, and
bullet you must be a first-time homebuyer - that is, you, and your spouse if you are married, must not have jointly or separately owned another principal residence during the 3 years prior to the date of purchase, OR
bullet you have lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the new home is purchased, and the settlement date is after November 6, 2009.

The credit is claimed

bullet on IRS Form 5405 First-Time Homebuyers Credit (pdf).  See also Form 5405 Instructions (pdf)
bullet on either the 2008 or 2009 tax return, for a qualified 2009 purchase.  The credit for 2008 purchases are claimed on the 2008 tax return.  For those who have filed a 2008 tax return, IRS Form 1040X Amended U.S. Individual Income Tax Return (pdf) can be filed in order to get a refund in 2009.
bullet on either the 2009 or 2010 tax return, for a qualified 2010 purchase.  The IRS will issue a December 2009 revision of Form 5405, which must be used for:
bullet homes purchased after November 6, 2009, whether the credit is claimed for 2008 or 2009, and
bullet all home purchases that are claimed on 2009 returns

Credit for homes purchased in 2009 or 2010 (close before July 1, 2010):

bullet is either 10% of the purchase price or $8,000, whichever is less, for single taxpayers or a married couple filing jointly.  The maximum is $4,000 for married filing separately.
bullet is a maximum of $6,500 for long-time residents, or $3,250 for married individuals filing separately.
bullet begins to phase out for taxpayers whose modified adjusted gross income (MAGI) is more than $125,000 (previously $75,000), or $225,000 (previously $150,000) for joint filers
bullet is reduced to zero for MAGI of $145,000 and more, or $245,000 and more for joint filers
bullet is fully refundable.  A homebuyer with no taxable income who qualifies for the credit may file for the sole purpose of claiming the credit, and receive a full refund.
bullet does not have to be repaid, as long as the home remains your main home for 36 months after the purchase date.

Credit for homes purchased in 2008:

bullet is either 10% of the purchase price or $7,500, whichever is less, for single taxpayers or a married couple filing jointly.  The maximum is $3,500 for married filing separately.
bullet begins to phase out for taxpayers whose MAGI is more than $75,000, or $150,000 for joint filers
bullet is reduced to zero for MAGI of $95,000 and more, or $170,000 and more for joint filers
bullet is fully refundable.  A homebuyer with no taxable income who qualifies for the credit may file for the sole purpose of claiming the credit, and receive a full refund.
bullet must be repaid over a period of 15 years

Repayment exceptions:

bullet If you die, remaining installments are not due.  If you filed jointly and you die, the surviving spouse must repay his half of the remaining repayment amounts.
bullet All remaining annual installments become due on the return for the year that you stop using the home as your main home.  This includes if the home becomes a vacation home, or its use is changed to business or rental property.  There are special rules for involuntary conversions.
bullet All remaining annual installments become due on the return for the year in which the home is sold.  If the home is sold to an unrelated taxpayer, the repayment is limited to the amount of gain on the sale.  If there is a loss, the installments may be reduced or even eliminated.
bullet If your home is transferred to your spouse, or as part of a divorce settlement, to your former spouse, that person must make the remaining installment payments.

IRS information:

bulletFirst-Time Homebuyer Credit
bulletFirst-Time Homebuyer Credit:  Questions and Answers
bulletMembers of the Military and Certain Other Federal Employees

Tax Tip:  For 2010 home purchases, the credit could have been claimed on either your 2009 or 2010 tax return.  Compare your 2009 and 2010 incomes (MAGI).  You may have qualified for a higher credit on the 2010 return if your income was lower.

Revised: February 04, 2017

 

 

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