Deadline Extended for Homebuyer Tax Credit
Posted July 16, 2010
On July 2, 2010, President Obama signed a bill that once again extends the closing deadline for the Homebuyer Tax Credit, this time to Sept. 30, 2010. According to the National Association of Realtors, as many as 180,000 additional homeowners will be able to take advantage of the credit that would otherwise have missed out.
Previously, taxpayers who had entered into a binding contract prior to May 1 had to close the deal by June 30 to be eligible for the credit. The binding contract date remains the same; closing must now be before the end of September.
The benefit offered by the credit remains the same as the previous version of the law. First-time homeowners can take a credit equal to 10 percent of the purchase price of the home (maximum home price of $800,000) up to $8,000. Other qualified homeowners who are not first-time buyers may also be able to claim a $6,500 credit or 10 percent of the purchase price, whichever is less.
Special filing and documentation requirements apply to taxpayers claiming the credit. Those who entered into a purchase contract on or before April 30, 2010, but who closed after that date, should attach a copy of the contract to their return showing:
- Names and signatures of all parties (if required by local law)
- Property address
- Purchase price
- Date of the contract
In addition to filing Form 5405 “First-Time Homebuyer Credit and Replacement of the Credit,” all eligible homebuyers must include one of the following documents when they file for the credit:
- Settlement Statement – A copy of the settlement statement showing the names and signatures of all parties, property address, sales price and date of purchase. The settlement statement is considered to be properly executed if it is complete and valid according to local law. In locations where signatures are not required, the IRS encourages the buyer to sign the settlement statement prior to attaching it to the tax return even when the settlement form does not include a signature line.
- Retail Sales Contract – For mobile home purchasers who are unable to get a settlement statement, a copy of the executed retail sales contract showing the names and signatures of all parties, property address, purchase price and date of purchase.
- Certificate of Occupancy – For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.
A taxpayer who entered into a binding contract before May 1, 2010 (and who closes by July 1, 2010) must also attach pages from the signed contract showing the names and signatures of all parties, the property address, the purchase price and the date of the contract.
A taxpayer claiming the credit as a long-term resident of the same main home must attach copies of one of the following:
- Form 1098
- Mortgage interest statement (or substitute statement)
- Property tax records
- Homeowner’s insurance records
These records should be for five consecutive years of the eight-year period ending on the purchase date of the new home.
Three options are available for claiming the credit on a qualifying 2010 home purchase:
- If a 2009 return has not yet been filed, a taxpayer can claim the credit on Form 1040 for the 2009 tax year. Electronic filing is not available for this option, but taxpayers can use IRS Free File to prepare their return. The returns must then be printed out and mailed to the IRS, along with all required documentation. Direct deposit is available.
- If a 2009 return has already been filed, use Form 1040X to file an amended return.
- Wait until next year and claim the credit on a 2010 Form 1040.
The revived credit phases out for individuals with income between $125,000 and $145,000, and married couples with joint income between $225,000 and $245,000.
The Homebuyer Tax Credit is not available to taxpayers who can be claimed as a dependent, or to those under age 18. There are also prohibitions against certain intra-family purchases.
Contact your local Clifton Gunderson office or 1-888-CPA-FIRM for more on this and other important tax issues.
The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, or tax advice or opinion provided by Clifton Gunderson LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader’s specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Clifton Gunderson LLP or other tax professional prior to taking any action based upon this information. Clifton Gunderson LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.
