First-time Home Buyers Tax Guide
Have you ever heard of the Worker, Homebuyer, and Business Assistance Act of 2009? If not, you could be missing out on a sweet, sweet tax credit. And no, I'm not trying to talk up some blasé deduction or meaningless adjustment. I'm talking about a substantial, lump-sum mega credit that favorably impacts your tax return. So, if you've recently bought a new home and want to harvest an $8,000 gift from the government, follow along.
Before you get too excited and start running up your credit card on Amazon, let's go over the rules. This has to be your primary residence and you have to have bought on or after January 1, 2009 and on or before April 30, 2010. If you signed a contract before April 30, 2010, you have until September 30, 2010 to close on your new pad. If you make more than $75,000 (as a single) or $150,000 (married filing jointly), this credit is not for you. If this is your first house, but your spouse has already made a purchase, you will not qualify. Capiche?
Your Guide
But if you fall within those guidelines, get yourself a Form 5405, entitled "First Time Homebuyer Credit and Repayment of the Credit". Just know this form is broken up into 4 parts. Part 1 wants to feel you out and get some general information. Part 2 starts to get into the nitty gritty of the numbers and fleshes out the amount of your credit. Parts 3 and 4 have to do with repayment and are beyond the scope of this text.
General Intel
Line A needs you to jot down your new address, but only if it's different than the dwelling on page 1 of your Form 1040. On Line B you need to record the date of your purchase and, if it was before May 1, 2010, go to line E. If not, you'll have to check out line C. On line C it's asking exactly when you bought. Was it on April 30, 2010 but before October 1, 2010? Did you enter into a contract before May 1 to close before July 1, 2010? Hopefully you'll be able to answer yes and move on to line E.
Line D is dense, but it's giving you a pass if you're a member of the military or an employee of the intelligence community and were on extended duty outside the US for 90 days after December 31, 2008, and ending before May 1, 2010. Line E is making sure that family members aren't gaming the system by passing a family home around the campfire. If that doesn't apply, move along to Line F, which wants to know the tax year you want your credit.
Numbers
Line 1 is asking for your purchase price and line 2 wants you to figure 10% of your new home's value. Line 3 asks if you're a first-time homebuyer; if so you can enter $8,000. If you're a long-time resident (one who has owned and used the same home as your main home for any 5 year period during an 8 year period ending on the purchase date) enter $6,500. Now, enter the smaller of line 2 or 3 on line 4.
Line 5 is looking for your adjusted gross income. Don't remember how to figure it? Check HERE. On Line 6, if the date you purchased was before November 7, 2009, enter $75,000 ($150,000 if filing jointly); if it's after November 6 enter $125,000 ($225,000 if filing jointly). Line 7 is asking if your AGI is more than the previously mentioned numbers. If you make less, you qualify for the credit, can enter 0 on line 9, and move on to line 10. If you make more, subtract line 6 from line 5 and enter the total. If that total is $20,000 or more you're out of luck.
Now simply divide line 7 by $20,000 and enter the result as a decimal on Line 8. Then multiply line 4 by line 8 and enter it on Line 9. To get your credit, subtract line 9 from Line 4 and enter the result on Line 10. Just be sure to include this number on any other applicable 1040 forms.
Fin
An $8,000 credit could go a long way to furnishing your new home. Want a TV the size of one of your walls? Done. How about a new couch large enough to seat all 30 of your cousins, comfortably? Done. Pool? Done. Heck you could even use the money to put toward a new set of wheels. The point is a first time homebuyer credit is substantial enough to be worth your time. So make the smart move, fill out a Form 5405, and outfit your dwelling with something that will make your neighbors jealous and your father proud.
