If you benefited from the U.S. Homebuyers Tax Credit in 2009, and now want to apply it to your tax forms prior to April 15, here’s a handy step-by-step guide in doing so — easily and accurately.
While hard numbers aren’t available, the new homebuyer tax credit certainly is having a significant impact on the troubled U.S. housing market in early 2010. Stan Humphries, chief economist at Zillow.com, wrote recently that the credit translates into good news for sellers, buyers and even lenders.
- Because of the extension to existing homeowners and the doubling of the salary limits for applicants, the new tax credits represent a substantial increase in the pool of eligible buyers, thus translating into more demand for housing.
- This increased demand due to the tax credits will soak up some of the foreclosures expected to flood the market in 2010. We still expect foreclosures to increase over the coming months before peaking (later in 2010), bringing more cheap inventory into the market.
- The spur in demand comes during the real estate market’s slow winter season, so it might even help out seasonal declines in home sales, which were expected to translate into downward price pressure. Spring and summer 2009 proved good for home values, as they flattened substantially.
The primary takeaway from homebuyers who qualify for the tax credit is this: it is a tax credit and not a tax deduction. In other words, if you complete your taxes and you are due for a $1,000 tax refund and an $8,000 homebuyer tax credit, you’ll get a $9,000 refund. Also, you don’t have to repay the tax credit, unless you sell your home within three years of the purchase date.
To qualify for the tax credit, you need a binding home purchase contract by April 30 — but you do have until June 30. If you’re a current member of the military, the government is grating you an additional year to claim the tax credit, to June 30, 2011.
Tax-wise, you’ll have to file your tax return on paper to claim the credit. The Internal Revenue Service requires additional documentation, thus making an online filing extremely difficult for the IRS to handle. You can still use tax preparation software from one of the popular tax providers, but you’re still going to have to print your tax return out and send it in to the IRS.
- Start by downloading IRS Revised Form 5405 (get it here). Follow the instructions to make sure you qualify for the credit then figure out the amount of your credit.
- Dig out Form HUD-1 Settlement Statement (it should be part of your home buying documentation, but you can get a new one here). If you can’t find a HUD-1 form, a certificate of occupancy will be accepted by the IRS.
- Include copies of all home purchase contracts, including signatures and names of all parties, the price of the home, the address and the contract date.
- Include your Form 1040. Write your bottom line on Form 5405 on the appropriate line on your income tax return. On the 2009 Form 1040 return it’s line 67. One caveat: You can’t claim the homebuyer’s credit with Form 1040EZ.
Once you file all your tax paperwork, it should take about six weeks to receive the actual new home tax credit.
One last note: make sure to review your tax forms to make sure all the data is accurate and complete. Any error will mean a delay in receiving your tax credit — and who needs that headache in this economy?
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