The federal government's First-Time Homebuyer Tax Credit is a tax break for new homeowners who just purchased a new house. This tax credit can be as much as $8,000 for married couples and $4,000 for individual borrowers. In addition, the IRS decided to extend the tax credit to long-time homeowners in 2009. Homeowners who have lived in their homes for a five-year consecutive period can now receive a tax credit on a new purchase.
Things You'll Need
- HUD1-A settlement statement
- Closing documents
- Certificate of occupancy (for newly constructed homes)
- For long-time homeowners:
- 1098 Mortgage Interest Statement
- Property tax statement
- Proof of homeowner's insurance
Purchase the new home. At closing you'll receive several documents, including a HUD1-A Settlement Statement (showing all fees, payoffs, and creditors paid), a mortgage note (showing interest rate and terms), and a rescission notice. Keep all of these documents in a safe place.
Wait until tax season of the next year and fill out your 1040 or 1040EZ as you normally would. You cannot receive your tax credit until you've filed the rest of your taxes.
Get a blank copy of Form 5405. This is the form you must complete to receive the tax credit. It must be filed as a paper document along with the HUD1-A Settlement Statement and the Certificate of Occupancy if you built your house with or without a construction loan. While the other tax documents can be filed electronically, you must submit this paper copy to the IRS. Be sure to make copies of all documents--do not send originals.
Consider having a professional complete your tax return. Because it is your first time claiming a mortgage or house tax credit you want to be sure you've filed accurately and aren't missing any deductions (like mortgage interest and fees).
File the same form (5405) if you're a long-time homeowner who has purchased a new home in the last year. You are also eligible for a tax credit. You must fill out the form, attach the Settlement Statement and Certificate of Occupancy (if necessary), and also include your former 1098 mortgage interest statement, proof of your old homeowner's insurance, and your old property tax bill. This also must be filed as a paper return.
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