Can I Get the Homebuyer's Tax Credit on a Refinance?

Taxpayers who purchased a new home during the tax years 2008, 2009 or 2010 qualify for the First-Time Homebuyers Tax Credit. Under the conditions of the credit, these homebuyers can receive up to $8,000 for buying their first home or up to $6,500 for buying a home after living in their first home for a period of time. Those who refinanced their existing mortgage were not eligible for the credit.

First-Time Homebuyers Tax Credit Overview

The U.S. government created the First-Time Homebuyers Tax Credit in 2008. Originally, the credit was designed as a short-term, no-interest loan for new homebuyers. The program was later expanded to a refundable tax credit as part of the American Recovery and Reinvestment Act in 2009. Homebuyers were eligible for up to 10 percent of the purchase price or $8,000 on their first home, or up to 10 percent of the purchase price or $6,500 on a new home if they had owned a home before.

Eligible Home Purchases

Initially, the Internal Revenue Service limited the tax credit to new home purchases only for a time, but expanded it to include second home purchases and newer homes bought by those who had previously owned real estate. Real estate investors who purchased homes for rental property or investment income were not eligible for the credit. Since you must purchase a new piece of property to receive the First-Time Homebuyers Credit, it is not applicable to refinanced mortgages on existing property.

Credit Requirements

To claim the credit, you must buy a home that you will use as a primary residence. You also have to remain in the home for at least three years after receiving the credit. Those who move out of their homes before the three-year limit expires will be required to repay the credit to the IRS.

Claiming the First-Time Homebuyers Tax Credit

Taxpayers who qualified for the credit used Form 5405 “First-Time Homebuyers Credit and Repayment of the Credit” to claim it along with their federal income tax return. If you qualify for the credit due to a 2010 home purchase, you can still receive it by amending your 2010 tax return using Form 1040X and completing Form 5405. The First-Time Homebuyers Credit expired on April 30, 2010.

References

• Internal Revenue Service: First-Time Homebuyer Credit Questions and Answers -- Basic Information
• Internal Revenue Service: The American Recovery and Reinvestment Act of 2009 -- Information Center
• Internal Revenue Service: First-Time Homebuyer Credit Questions and Answers -- Homes Purchased in 2008
• Internal Revenue Service: First-Time Homebuyer Credit Questions and Answers -- Homes Purchased in 2009 or 2010
• Internal Revenue Service; Tax Credit to Aid First-Time Homebuyers; Must Be Repaid Over 15 Years; September 2008
• Internal Revenue Service: First-Time Homebuyer Credit Questions and Answers -- Claiming the Credit on Your Tax Return
• Internal Revenue Service: Form 1040X - Amended U.S. Individual Income Tax Return
• Internal Revenue Service: Form 5405 - First-Time Homebuyer Credit and Repayment of the Credit
• Internal Revenue Service: First-Time Homebuyer Credit