Currently, the IRS has not completed the full form and instructions for Form 5405 for the First-Time Homebuyer Credit. However, available for a limited time only, the credit:
- Applies to home purchases after April 8, 2008, and entered into contract before May 1, 2010 and closed before October 1, 2010.
- Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.
- Is fully refundable, meaning that the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax that they owe.
However, if you purchased your home in 2008, the credit operates much like an interest-free loan, because it must be repaid over a 15-year period. So, for example, an eligible taxpayer who buys a home today and properly claims the maximum available credit of $7,500 on his or her 2008 federal income tax return must begin repaying the credit by including one-fifteenth of this amount, or $500, as an additional tax on his or her 2010 return.
If you purchased your home in 2009 or 2010, you must repay the credit ONLY if the home ceases to be your main home with the 36-month period beginning on the purchase date.
For the first time, long-time homeowners who buy a replacement principal residence may also claim a homebuyer credit of up to $6,500 (up to $3,250 for a married individual filing separately). They must have lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the replacement home is purchased.
Eligible taxpayers who purchase their homes after November 6, 2009, will claim the credit on new IRS Form 5405. This form, along with further instructions on claiming the first-time homebuyer credit, will be included in the 2009 tax forms and instructions and are also available on www.IRS.gov, the IRS Web site.
FAQ's About the Credit: