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The Homebuyer Credit

(To claim this credit see below for a list of documents which you must attach to your return.)

Here are the top 10 things the IRS wants you to know about the expanded credit and the qualifications you must meet in order to qualify for it.

1.     You must buy – or enter into a binding contract to buy a principal residence – on or before April 30, 2010.

2.     If you enter into a binding contract by April 30, 2010 you must close on the home on or before June 30, 2010.

3.     For qualifying purchases in 2010, you will have the option of claiming the credit on either your 2009 or 2010 return.

4.     A long-time resident of the same home can now qualify for a reduced credit. You can qualify for the credit if you’ve lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the new home is purchased and the settlement date is after November 6, 2009.

5.     The maximum credit for long-time residents is $6,500. However, married individuals filing separately are limited to $3,250.

6.     People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after November 6, 2009. The full credit is available to taxpayers with modified adjusted gross incomes up to $125,000, or $225,000 for joint filers.

7.     The IRS will issue a December 2009 revision of Form 5405 to claim this credit. The December 2009 form must be used for homes purchased after November 6, 2009 – whether the credit is claimed for 2008 or for 2009 – and for all home purchases that are claimed on 2009 returns.

8.     No credit is available if the purchase price of the home exceeds $800,000.

9.     The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement.

10.   A dependent is not eligible to claim the credit.

All eligible homebuyers must include with their 2009 tax returns one of the following documents in order to receive the credit:
bullet 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.
bullet If you close after April 30, 2010, attach a copy of the pages from a signed contract to make a purchase showing all parties' names and signatures, the property address, the purchase price, and the date of the contract.
bullet 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.
bullet 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.

In addition, the new law allows a long-time resident of the same main home to claim the homebuyer credit if they purchase a new principal residence. To qualify, eligible taxpayers must show that 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 checks involving the homebuyer credit, and it encouraged homebuyers claiming this part of the credit to avoid refund delays by attaching documentation covering the five-consecutive-year period:

bullet Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements,
bullet Property tax records or
bullet Homeowner’s insurance records.