Federal Tax Credit — Things You Need to Know
Posted on February 22nd, 2010 by DarcyThe last few years have been plagued with first time buyer programs. This is a very good thing. In 2008, the first time buyer tax credit was first introduced. It was quite a bit different than the tax credit now. “Back then” the program wouldn’t let the buyer take advantage of the federal tax credit AND a first time home buyer program, such as one with a lower rate or down payment assistance.
Then the second credit was introduced in 2009. Every year, it’s been getting better. In 2009, the two programs could be combined which gave buyers the best of both worlds. Money for purchasing and money to help after the fact. Thousands of people took advantage of this credit and quite a few of them “took advantage” of the credit — meaning, people cheated the system — there weren’t enough stop guards in the system. I even heard someone had their child apply for the credit. Hmmm, think you need to be 18 to buy a home. In any case, people scrambled to take advantage of the credit by closing on their home prior to December 1. First time buyers were coming out of the woodwork. It was a mad rush to buy, close and amend the 2008 taxes to get the money.
Psych! Guess you really didn’t have to buy and close by the end of November. Hail to the government; they extended the credit. Not only that, they made it current homeowner “friendly”. The new rule, as you probably know, is you must have a signed/accepted purchase agreement by April 30th and must close on the house by June 30th. The credit is equal to 10% of the sale price or $8000, whichever is less, for a first time buyer. The current homeowner can qualify as long as they have owned their primary residence for a consecutive five of the last eight years. Similar situation — 10% of the sale price or $6500, lesser of the two.
Here is what you NEED to know. We all like to get our refunds as quickly as possible! Who wouldn’t? So, e-filing is the way to go. And many people have done that. First, you can amend your 2009 taxes anytime after you close on the home. You’ll need to file a 1040x (form for amending) and the 5405 (form for the credit). The urgent piece of information is you CANNOT e-file. Here is information from the Minnesota Homeownership Center:
“Because of the documentation requirements for claiming the credit, taxpayers who claim the credit on their 2009 tax return must file a paper — not electronic — return and attach Form 5405, First-Time Homebuyer Credit and Repayment of the Credit”
So, thanks to people falsifying taxes and taking advantage of free money, you’ll have to do the lengthy step of filing by paper. And timing on these refunds? I have heard anywhere from 14-16 weeks. It doesn’t help that it’s tax time. Oh and thoughts about whether they’ll extend the tax credit. I really don’t think so. But, hey, I could be wrong. If they do extend it, you can count on a new blog!
Tags: 6500 tax credit, 8000 tax credit, down payment assistance, first time buyer programs, first time home buyer, purchase agreement
