In an effort to stimulate the economy and the housing market, our government gave us some very nice tax breaks last year for purchasing a home before May 1, 2010. This gift from Uncle Sam allowed many first time homebuyers, and individuals who had not owned a home in 3 years to take advantage of a very lucrative tax break of up to $8,000 for first time homeowners, or up to $6,500 for those that had previously owned a home and lived in it for at least five consecutive years.
If you purchased a home in 2010, you may be eligible for the Home Buyer Tax Credit.
To claim your tax credit on your 2011 tax returns, follow the rules:
- You must have signed a contract to purchase your primary residence before May 1, 2010
- If you closed on your home prior to September 30, 2010, you should qualify for the credit, as long as your original contract stated that the purchase was to be completed by June 30, 2010. Congress amended the original date because many buyers were involved with short sale or foreclosure transactions, which were slower than normal sales to close.
- The first time home buyer credit is worth 10% of the purchase price of your home, up to a maximum of $8,000.
- Buyers who had previously owned a home for at least 5 consecutive years of the last 8 years are eligible for a credit up to 10% of the purchase price, or a maximum of $6,500.
- The purchase price for both credits is limited to homes purchased for less than $800,000.
- Full credit is available to taxpayers with a modified adjusted gross income of up to $125,000, or $225,000 for joint filers.
Check with your tax accountant for more detailed information about the tax credits that may be available to you.
It could take longer to receive your refund, as the IRS is requiring more documentation to prove you purchased your home within the appropriate time period, and are requiring that you file your tax return by mail. Here are some documents you may need:
- If you owned a home previously, you will need copies of documents showing you lived in the residence for 5 consecutive years during the past 8 years. You can use mortgage interest statements, tax records or homeowner’s insurance statements.
For addtional information, see the USA Today article by Sandra Block, titled “Can You Get Home Buyer Credit”.
As always, talk with the experts, your Lender, your CPA, and Your Realtor, for more detailed information.