The Internal Revenue Service has just issued its formal guidelines for you if are considering applying for the new $6,500 home buyer federal tax credit or the extended $8,000 version, however, its suggested by the IRS that you wait for at least a couple of weeks before you do apply.
The reason is that the IRS will, later this month, publish its revised Form 5405 with all the key instructions needed for you to get a check from the government.
The newly revised version of the 5404 form incorporates major changes to the tax credit program created by Congress in legislation signed by President Obama this past November 6th. They include a cap on home prices, expanded income limits as well as additional documentation requirements and prohibitions against making claims by dependents.
Just before Thanksgiving the IRS released a tax bulletin that emphasized that all home purchasers after November 6th are required to use the new version of Form 5405 in order to claim the tax credit. The reason for this is that if you send in the old version of 5404 sadly your request for the credit will most likely go nowhere.
The legislation for the first-time home buyer's tax credit extension, also known as the Worker, Homeownership and Business Assistance Act of 2009, will extend the $8,000 credit up to April 30th for signed contracts and those purchases must close escrow by June 30th.
The legislation also created a new tax credit for people who have owned a principal residence for five consecutive years over the past eight years, and who purchase a replacement principal residence with a signed contract no later than April 30th which also must close escrow by June 30th.
For both the first-time home buyers and the repeat buyer's tax credits, the credit will be equal to 10% of the purchase price of the house, up to a maximum of $6,500 for qualified repeat buyers or $8,000 for new home buyers.
The recently released IRS bulletin outlined the agency's guidance on other important features of the amended credit program:
- Members of the armed forces, as well as diplomatic and intelligence personnel serving in foreign countries, will get an extra year to buy a principal residence and still qualify for a credit. They will have until April 30, 2011, to enter into a contract to purchase a house, and until June 30, 2011, to close on it.
- Anyone who buys a house after November 6th, even those who had intended to get in the door before the previous November 30th expiration date for the $8,000 credit - will now need to comply with several new rules. First, the house cannot cost more than $800,000. Second, no one under age 18 can claim the credit no matter what the circumstances. And finally, anyone who is counted as a dependent on another taxpayer's federal filings is ineligible for a home purchase tax credit.
- The expanded income limits for purchasers after November 6th range to $125,000 in "modified adjusted gross income" for single taxpayers and to $225,000 for those who file jointly. Singles with incomes between $125,000 and $145,000 may be eligible for reduced credit amounts, as are joint filers with incomes from $225,000 to $245,000. Anyone with an income above these amounts cannot qualify for either of the credits. Under the pre-Nov. 6 rules, taxpayers applying for the $8,000 credit were limited to incomes of $75,000 (single filer) to $150,000 (joint filer).
The IRS also offers detailed consumer information resources on both credits, and includes FAQ's on a wide variety of home purchase scenarios.
This article is for informational purposes only. Individuals should consult with qualified professionals on each individual's particular situation. This article should not be construed as legal advice.