How to Claim the $8000 Homebuyer Tax Credit

The U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT has issued a “Mortgage Letter” clearly stating how the $8,000 Tax Credit works, how to be eligible for the tax credit and how to claim the tax credit. Here are some important points mentioned in this letter.

• How the $8,000 Tax Credit works
  (Please check the IRS website to ensure you have up-to-date information)
  - Generally, the credit is the smaller of:
  $8000 or 10% of the purchase price of the home
  - A phase-out of the credit begins when the taxpayer’s modified adjusted income exceeds
  $75,000 or $150,000 if married filing jointly, and is eliminated completely at $95,000 or $170,000 if married filing jointly.
  - As a “refundable” tax credit, taxes owed by or refunds due to the taxpayer are factored
  into the calculation.
  
• How to be Eligiable for this Tax Credit
  - First-time homebuyers, defined by IRS as those not having had any ownership, including
  that with a spouse if married, during the three-year period ending on the date of purchase.
  - Owner-occupants who purchase a principal residence and close on the mortgage before
  December 1, 2009.
  -  First-time homebuyers must purchase the property from a source unrelated to them, i.e., they cannot purchase the house from a spouse, parent, grandparent, child, or acquire the property by gift or inheritance and obtain the tax credit.
• How to Claim the Tax Credit:
  - Filing form IRS 5405 [available at http://www.irs.gov/pub/irs-pdf/f5405.pdf], “First-Time Homebuyer Credit” along with filing:
  The 2008 tax return (if not yet filed)
  An amended 2008 tax return (if already filed)
  The 2009 tax return

Complete information on how the first time homebuyer tax credit works, including the eligibility requirements for the tax credit, the amount of the tax credit that a first-time homebuyer may be eligible to receive, and how a homebuyer may claim the tax credit is available on the IRS website at http://www.irs.gov/newsroom/article/0,,id=204671,00.html?portlet7.

To print out the official Mortgage Letter from The U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, click here for a printable pdf.