Instructions for Filling Out IRS Form 5405
Purchasing a new home in 2008, 2009 or 2010 qualifies both new and longtime homeowners for a one-time tax credit. The credits free up money for new homeowners while giving the economy a boost. To receive the credit, a homeowner must complete IRS Form 5405.
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Instructions
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Qualify for the tax credit by filling in Part 1 of the form. Eligible homeowners must be United States citizens purchasing a home in the United States by October 1, 2010. Adjusted gross incomes must be less than $125,000 or less than $225,000 if filing jointly. The home must be a primary residence that will be occupied for at least three years or the credit must be repaid. To be classified as a first-time homebuyer, the purchaser must not have owned a home the past three years. A longtime homeowner can be considered a first time homeowner if a previous home was owned for a total of eight years, during which it was used as a primary residence for five consecutive years.
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Get the credit by completing Part II. A first-time homebuyer who qualifies will receive a one-time credit of $8,000; or $4,000.00 if married and filing separately; or 10 percent of the purchase price, whichever is the lesser amount. Long-time homeowners who qualify will receive a one-time credit of $6,500.00 for single or filing jointly; or $3,250.00 if married and filing separately; or 10 percent of the purchase price, whichever is the lesser amount.
To get the credit, documentation must be attached to the tax return. As a result, tax returns cannot be submitted electronically. Settlement copies, including names and signatures, date of sale, property address and sales contract price need to be included. Longtime homeowners need to include one of the following: a copy of mortgage interest statements, property tax records or homeowner's insurance policy.
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Record changes in primary residence in section III. If a tax credit was received in 2008 or 2009, and the homeowner moved before living in the residence for 36 months, then the credit may need to be repaid. List date the home was sold or ceased being used as a primary residence. Disclose if the homeowner or the homeowner's spouse was a member of uniformed service, foreign service or a member of the intelligence community. If the move was in response to government orders, the owner is exempted from repayment. Check the boxes that apply: sold to a non-relative, sold through foreclosure, sold home to a relative, converted entire home to a rental property, transferred home to a spouse or house was condemned. Record If the homeowner who received the tax credit died in 2010. In this case, no repayment is necessary.
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Complete section IV, Repayment of Credit Claimed for 2008 or 2009. Homes purchased in 2008 or 2009 that have been sold are recorded in Part IV. List any gains on the sale of the property. Disclose past total homeowner credits. Installments for repayments are also calculated and entered in this section.
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References
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