How to Claim the Federal Homebuyer Tax Credit for Existing Homeowners

By: Danny Lipford

Homeowners who have lived in their present home for at least five years ,and meet certain other requirements, may be eligible for a refundable federal tax credit of up to $6,500 if they purchase a home between November 7, 2009, and April 30, 2010.

The homebuyer tax credit for homeowners is a provision of the Worker, Homeownership, and Business Assistance Act of 2009. It can be applied to the purchase of both existing and new homes, including single-family homes, condominiums, manufactured homes, and even houseboats. The tax credit is refundable, meaning that a refund check will be issued to the homeowner if no federal income taxes are owed.

Eligibility Requirements for Tax Credit

In order to be eligible for the federal homebuyers tax credit for homeowners, the following conditions must be met:

    • The home must be located in the United States.

  • It must serve as the taxpayer’s principal residence (vacation homes and rental property are not eligible).
  • The homeowner must have lived in the home for the last five years.
  • The purchase price on the home must be $800,000 or less.
  • The purchase agreement must be signed between November 7, 2009 and April 30, 2010, with the sale completed by June 30, 2010.
  • The home must serve as the primary residence for at least three years after purchase.
  • The home cannot be bought from a spouse or close relative (parent, grandparent, child, or grandchild).
  • The tax credit is limited to a maximum of 10% of the purchase price for homes costing under $65,000.
  • The homeowner’s income must be less than the maximum amount allowed.

Income Requirements for Tax Credit

In order to be eligible for the federal homebuyer tax credit for homeowners, the following income requirements must be met:

  • Full Tax Credit: Taxpayers filing individually with a modified adjusted gross income (MAGI) of $125,000 a year or less, or married couples filing jointly with a MAGI of under $225,000, are eligible for the full $6,500 tax credit.
  • Partial Tax Credit: Taxpayers filing individually with a MAGI of less than $145,000, and married couples filing jointly with under $245,000 in income, may be eligible for a partial tax credit.
  • No Tax Credit: Taxpayers filing individually with a MAGI of over $145,000, and married couples filing jointly making over $245,000, are not eligible for the tax credit.

How to Claim the Tax Credit

If you qualify for the tax credit:

  • Complete IRS Form 5405.
  • Enter the amount determined on line 67 of your 2009 or 2010 return.

Further Information

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