Key Takeaways
- You can use IRS Form 5405 to claim the homebuyer's tax credit if you were a first-time homebuyer who purchased your main home within specific dates around early 2010.
- A smaller credit was available for previous homeowners who purchased a new home and used it as their main residence for five consecutive years during the eight-year period ending on the date you closed on the new home.
- To qualify for the credit, the price of the home you purchased in 2010 could not exceed $800,000.
- To receive this credit, you were required to provide detailed information about your home purchase and income, and attach this Form 5405 along with other required documents to your personal income tax return.
In an effort to stimulate the economy, the federal government allows you to claim a tax credit that covers a portion of the costs to purchase a new home. If you are eligible to claim the credit, the IRS requires you to complete Form 5405 and attach it to your personal income tax return along with other documentation.
You may be eligible for the tax credit if you purchase your first main home between Jan. 1, 2009 and April 30, 2010. You can also qualify if you enter into a binding contract before May 1, 2010 to complete the purchase of the home by June 30, 2010 and actually close on the home no later than Sept. 30, 2010.
The IRS requires you to provide documentation that proves you completed the purchase within the relevant time-frame. Generally, the settlement statement you receive that includes the names of the buyer and seller, property address, date of sale and purchase price is sufficient.
The maximum credit you can claim is the smaller of $8,000 or 10 percent of the home’s purchase price. When you fill out Form 5405, be sure the check the appropriate box indicating that you qualify as a first-time homebuyer.
TurboTax Tip:
Typically, when you purchased a home during the qualifying period in 2010, you were allowed to claim a homebuyer tax credit up to either $8,000 or 10% of your home’s purchase price, whichever was smaller.
A smaller credit is also available to existing or former homeowners who purchase a new main home. To qualify, you must own a home and use it as your main residence for five consecutive years during the eight-year period ending on the date you close on the new home.
Long-time residents are subject to the same closing date requirements as first-time homebuyers. However, in addition to submitting Form 5405 and a settlement statement for the new home, you must also provide the IRS with documentation that proves you meet the five-consecutive-year requirement. You can satisfy this requirement by submitting mortgage-interest statements, property tax records or proof of insurance coverage. The maximum credit is the smaller of $6,500 or 10 percent of the home’s purchase price.
To qualify for the credit as either a first-time homebuyer or long-term resident, the purchase price of your new home cannot be more than $800,000. The IRS also imposes income limitations. You cannot claim the credit if your Adjusted Gross Income (AGI) is $145,000 or more, or $245,000 for couples filing a joint return. Additionally, a taxpayer who can be claimed as a dependent to another taxpayer is ineligible to claim the tax credit on their personal income tax return.
The IRS requires you to prepare IRS Form 5405 before you can claim the credit. This two-page form requires you to provide all details relating to the home purchase such as the price you pay and the date of closing, as well as income information from your Form 1040. The form also provides a 10-step credit calculation. If claiming the credit will increase your refund amount, you must ensure that Form 5405 is accurate and that you provide all other documentation to avoid delay in receiving your refund check.
Let a local tax expert matched to your unique situation get your taxes done 100% right with TurboTax Live Full Service. Your expert can work with you in real time and maximize your deductions, finding every dollar you deserve, guaranteed.
You can also file taxes on your own with TurboTax Deluxe. We’ll search over 350 deductions and credits so you don’t miss a thing.
