Claim the Home Buyer Federal Tax Credit with IRS Form 5405

Earlier this month, the IRS released form 5405, which allows homebuyers to claim up to an $8000 tax credit for the purchase of a home.  You can get a copy of IRS form 5405 by clicking here or check out the copy embedded below. You can find full details on claiming the tax credit on IRS.gov.

IRS form 5405 home buyer tax credit –

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First Time Home Buyer Federal Tax Credit Extended and Expanded

Are You Excited or Upset About the Extended Home Buyer Tax Credit?

Some consumers are excited about the extended and expanded home buyer (and now, existing home owner) federal tax credit. But others feel quite the opposite.

Why are some consumers upset? Check it out… “Why the Extended Home Buyer Tax Credit is a Slap in the Face”

How do you feel about it?

IRS First Time Home Buyer Credit FAQ’s, Is It a Gimmick?

Curious as to how the IRS "first time home buyer credit" works, whether you qualify and how to take advantage of it? There's a good FAQ section over at FederalHousingTaxCredit.com that goes over the "first time home buyer credit" in detail.

Here's an excerpt:

1. Who is eligible to claim the $7,500 tax credit?

First time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after April 9, 2008 and before July 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs.

2. What is the definition of a first-time home buyer?

The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

3. How do I claim the tax credit? Do I need to complete a form or application?

Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. No other applications or forms are required. No pre-approval is necessary; however, prospective home buyers will want to be sure they qualify for the credit under the income limits and first-time home buyer tests.

4. What types of homes will qualify for the tax credit?

Any home purchased by an eligible first-time home buyer will qualify for the credit, provided that the home will be used as a principal residence and the buyer has not owned a home in the previous three years. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats.

For the full set of questions and answers regarding the IRS "first time home buyer credit", check out the FAQ section over at FederalHousingTaxCredit.com.

***NOTE: Before you get too excited about the tax credit, make sure you go through all the FAQ's and then go over to CNNMoney.com to read this post about how it may not be all that it's cracked up to be.

The Skinny On Congress’s Housing Bill and First Time Home Buyer Credit

Many of you have heard about Congress’s massive federal housing bill and mortgage bailout sections that include two tax provisions/tax credits for "first time" home buyers. The most impactful part of the bill are the two provisions and tax credits for "first time" home buyers. So here’s the "skinny" on the two provisions:

• "First-time" home buyers would get a tax credit of 10 percent of the purchase price of the home up to a maximum of $8,000
• The tax credit would reduce the buyers’ federal tax bills, dollar for dollar, for the year of the purchase
• A second form of the new tax benefit would be available to millions of home owners who don’t itemize on their federal tax filings. Those home owners will receive a $500 to $1,000 annual deduction for the real property taxes they pay, but currently can’t write off.
• The $1,000 deduction would be for married homeowners filing jointly. It would ne $500 maximum for single filers.

But there is some fine print…

• The $8,000 maximum on the new tax credit is limited to married home buyers who file their taxes together. Singles get maxed out at $4,000
• The credit isn’t free. It’s like like a loan. You’ve got to repay it to the IRS over a fifteen year period that starts one year after you close on the purchase. Each year of the fifteen, you’re required to repay six and two-thirds percent of the original tax credit amount
• If you sell the house within the first year, you don’t qualify for any credit whatsoever. If you sell later, you’re liable for taxes on any remaining amounts of the credit you haven’t already repaid, but not beyond your capital gain, if any, on the sale.

There’s more fine print, but it’s good news:

• The definition of "first time" home buyer isn’t necessarily what you think. You can still qualify for the credit even if you’ve bought and owned homes before. You just can’t have owned a house any time in the three years before your latest purchase.

In a nutshell, it isn’t free money. It’s basically a deferred tax credit that must be paid off in full at some point in time – 15 years at the maximimum. It’s definitely good in many ways, but it’s not a true "tax credit" as you may think.