Important Information About First Time Home Buyer Credit

The Worker, Homeownership and Business Assistance Act of 2009 was signed into law November 6, 2009.

If you are in the market for a new home, you may still be able to claim the First-Time Homebuyer Credit.

This new law extends and expands the first-time homebuyer credit allowed by previous legislation.

Here are key points the IRS wants you to know about the expanded credit and the qualifications you must meet in order to qualify for it.

1. You must buy – or enter into a binding contract to buy a principal residence – on
or before April 30, 2010.
2. If you enter into a binding contract by April 30, 2010 you must close on the home on or before
June 30, 2010.
3. For qualifying purchases in 2010, you will have the option of claiming the credit on either your
2009 or 2010 return.
4. A long-time resident of the same home can now qualify for a reduced credit. You
can qualify for the credit if you’ve 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.
5. The maximum credit for long-time residents is $6,500. However, married individuals filing
separately are limited to $3,250. The maximum credit for first-time homeowners is
$8,000 (up to $4,000 for married filing separately).
6. People with higher incomes can now qualify for the credit. The new law raises the income
limits for homes purchased after November 6, 2009. The full credit is available to
taxpayers with modified adjusted gross incomes up to $125,000, or $225,000 for joint
filers.
7. The IRS will issue a revised Form 5405 to claim this credit on 2009 tax returns. The revised
form must be used for homes purchased after November 6, 2009 – whether the credit is
claimed for 2008 or for 2009 – and for all home purchases that are claimed on 2009
returns.
8. Homebuyers who claim the credit on their 2009 tax return will not be able to file
electronically but instead will need to file a paper return. For homes purchased in 2009
there is an option to take the credit on an original or amended 2008 tax return.
9. The new law includes documentation requirements. See revised Form 5405 for details.
10. No credit is available if the purchase price of the home exceeds $800,000.
11. The purchaser must be at least 18 years old on the date of purchase. For a married couple,
only one spouse must meet this age requirement.
12. A dependent is not eligible to claim the credit.

IRS encourages all eligible homebuyers to take advantage of the First-Time Homebuyer Credit but at the same time cautions taxpayers to avoid schemes that help ineligible people file false claims for the credit.