The Homebuyer Tax Credit program expires today, nearly six months after it was extended and expanded as part of an economic recovery package of incentives for Americans and an intended boost for the ailing and sluggish housing market.
The first-time homebuyer tax credit is worth up to $8,000. The tax credit for those buying replacement homes is up to $6,500. Both expire at midnight today, for closings before July 1.
Meanwhile, the Internal Revenue Service is still having a tough time with getting home buyers to comply with the tax credits’ paperwork requirements when filing their returns.
“The IRS estimates that 50 percent of the individuals claiming the First-Time Homebuyer Credit will not attach the required documentation this year,” said a statement by the Treasury Inspector General for Tax Administration.
The original first-time homebuyer credit expired in early November, and led to a big boost in home sales in the late fall. The current tax credit program, however, failed to ignite existing and new home sales – at least until March – when sales activity saw big jumps from February’s dismal numbers.
For first-timers, the credit is 10 percent of the purchase price of the home, with a maximum available credit of $8,000 if the home was purchased in 2009 or early 2010 – for either a single taxpayer or a married couple filing a joint return, but only half of that amount for married persons filing separate returns.
Long-time homeowners who buy a replacement home after Nov. 6, 2009, or in early 2010, may qualify for a credit of up to $6,500, or $3,250 for a married person filing a separate return.
First-time buyers must file Form 5405, and those eligible homebuyers must include one of the following documents in order to receive the credit:
- A copy of the settlement statement showing all parties’ names and signatures, property address, sales price, and date of purchase. Normally, this is the properly executed Form HUD-1, Settlement Statement.
- For mobile home purchasers who are unable to get a settlement statement, a copy of the executed retail sales contract showing all parties’ names and signatures, property address, purchase price and date of purchase.
- For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.
Repeat buyers can qualify for a tax credit if they lived in their old homes for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home.
The IRS has stepped up compliance on the repeat homebuyer credit, and it encourages homebuyers claiming this part of the credit to avoid refund delays by attaching documentation covering the five-consecutive-year period:
- Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements,
- Property tax records or
- Homeowner’s insurance records.