IRS Form 5405, First-Time Home Buyer Credit
7,500 & 8,000 Homebuyer Credits - How to Claim, Who Doesn't Qualify
On February 25, 2009, the IRS issued a press release that clearly distinguished between the two homebuyer tax credit amounts ($7,500 and $8,000); one is allowed for purchases made from April 9, 2008 through December 31, 2008, and the other is allowed for purchases made from January 1, 2009 through November 30, 2009. The article $7,500 & $8,000 First-Time Homebuyer Tax Credits discusses the differences between these two credits in detail. This article explains which tax form should be used to claim either credit and who doesn't qualify to take a credit.
Use IRS Form 5405 for $7,500 Tax Break & $8,000 First-Time Homebuyer Tax Credit
U.S. taxpayers should use Form 5405 to claim the first-time homebuyer tax credit; the same form should be used for the $7,500 or $8,000 credit. The IRS recently posted a revised version of the original Form 5405. The updated version reflects changes pursuant to the American Recovery and Reinvestment Act of 2009 (commonly known as the 2009 economic stimulus plan) that passed in February 2009.
Form 5405 and instructions can be downloaded in a single PDF file from the IRS website. To access it, go to irs.gov, then click on "More Forms and Publications" on the left side of the page. Under the heading, "Download forms and publications by:," click on "Forms and Instruction number." Finally, search for Form 5405 in the Product Number field.
Who Isn't Eligible for the First-Time Homebuyer Tax Credit?
Wealthy taxpayers don't qualify for a first-time homebuyer tax credit. Credit phase out begins at $75,000 per individual or $150,000 for married filing jointly. The phase out is calculated on lines 2 through 5 of Form 5405. The credit is completely phased out for individuals who make $95,000 or more (or $170,000 for joint filers).
In addition to those who exceed the income thresholds noted above, individuals can't claim either credit if any of the following items apply:
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- The person is a non-resident living in the U.S. who does not meet the green card test or substantial presence test for the calendar year.
- The purchased home is located outside of the U.S.
- The home is sold or ceases to be the taxpayer's primary residence before the end of 2008.
- The home was inherited or a gift from someone else.
- The home was purchased from a relative. This may include a spouse, parent, grandparent, children, and grandchildren. Related parties also include corporations or partnerships in which a person owns more than 50% of the stock or receives over 50% of the profits or interest.
For the $7,500 tax break only, the following individuals are also prohibited from claiming the credit:
- Anyone who is currently or formerly was eligible to claim the District of Columbia first-time homebuyer tax credit.
- The home purchase was financed with tax-exempt mortgage revenue bonds.
Related articles:
$8,000 First Time Home Buyer Tax Credit Deadline
IRS Tax Form 5405 - 8000 First Time Home Buyer Tax Credit Form Details
Resources:
Revised Form 5405, First-Time Homebuyer Credit
February 25, 2009 IRS News Release, IR-2009-14
Note: The Revised Form 5405 referred to in this article is the 2008 version. The 2009 version will be released by the IRS in spring 2010.
Read more at Suite101: IRS Form 5405, First-Time Home Buyer Credit: 7,500 & 8,000 Homebuyer Credits - How to Claim, Who Doesn't Qualify http://personal-tax-planning.suite101.com/article.cfm/irs_form_5405_firsttime_home_buyer_credit#ixzz0gNCM6Et4
