How to Claim the Federal Homebuyer Tax Credit for New Homeowners

By: Danny Lipford

First-time homeowners, which includes anyone who hasn’t owned a home in the last three years, may be eligible for a refundable federal tax credit of up to $8,000 if they purchase a home between January 1, 2009 and April 30, 2010.

The first-time homebuyer tax credit was a provision of the American Recovery and Reinvestment Act (ARRA) of 2009 and extended by the Worker, Homeownership, and Business Assistance Act of 2009. It applies to the purchase of existing or new homes and can be taken even if the homeowner does not owe any federal taxes (in which case a refund check will be sent to the taxpayer).

Tax Credit Eligibility Requirements

In order to be eligible for the federal first-time homebuyers tax credit, 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 purchase price on the home must be $800,000 or less.
  • The purchase agreement must be signed between January 1, 2009 and April 30, 2010, and the sale completed by June 30, 2010.
  • The home must serve as the primary residence for at least three years after the purchase was completed.
  • It cannot have been purchased from a spouse or close relative (parent, grandparent, child, or grandchild).
  • For homes worth less than $80,000, the tax credit is limited to a maximum of 10% of the purchase price.
  • The homeowner’s income must be less than the maximum amount allowed.

Tax Credit Income Requirements

In order to be eligible for the federal first-time homebuyers tax credit, the following income limits must be met:

  • Full Tax Credit: Taxpayers filing individually with a modified adjusted gross income (MAGI) of $75,000 a year or less, or married couples filing jointly with a MAGI of $150,000 a year or less, are eligible for the full $8,000 tax credit on homes purchased before November 7, 2009. For home purchased on or after November 7, 2009, income requirements have been increased to a maximum of $125,000 for single filers and $225,000 for joint filers.
  • Partial Tax Credit: Taxpayers filing individually with a MAGI of less than $95,000, and married couples filing jointly with under $170,000, may be eligible for a partial tax credit on homes purchased before November 7, 2009. For homes purchased on or after November 7, 2009, income requirements for partial credits have been increased to less than $145,000 for single filers and under $245,000 for joint filers.
  • No Tax Credit: Taxpayers filing individually with a MAGI of $95,000 or more, and married couples filing jointly making over $170,000, are not eligible for the tax credit on homes purchased before November 7, 2009. The maximum income for homes purchased on or after November 7, 2009, is $145,000 for single filers and $245,000 for joint filers.
  • Claiming the Tax Credit

    The tax credit can be taken either by:

    • Amending your 2008 federal tax return.
    • Claiming the credit on your 2009 federal tax return.

    To claim the credit, complete IRS Form 5405 and enter the amount determined on line 69 of your 2008 federal 1040 income tax return, or line 67 of your 2009 or 2010 return.

    Further Information

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    3 Comments on “How to Claim the Federal Homebuyer Tax Credit for New Homeowners”

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    • Gulab Singh Says:
      January 3rd, 2010 at 7:00 am

      I am planning to buy a house, a part of which I am planning to rent out. Can I still claim the homeowner tax credit?


    • Official Comment:


      Ben Erickson Says:
      November 19th, 2009 at 11:06 am

      Hi Tim,
      I checked with the IRS, and they said that the changes are so new for homes purchased after Nov. 6th, that they don’t know the answer yet. Check the IRS website http://www.irs.gov/ over the next few weeks for updated information. At the very least, you will be able to claim the tax credit on your 2009 tax return. Congratulations on your new home!



    • Tim Koster Says:
      November 18th, 2009 at 11:05 am

      We just purchased a home (Closed Nov 10th)with the intention of claiming the $8000 tax credit via the 1040x/5405 combination against the 2008 tax year. When we went to the IRS site to download the appropriate forms we found that the 5405 form is no longer valid after November 6. Does that mean those who close on a house have to wait until they file their 2009 taxes to get the money?


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