Home Buyer Tax Credit Requires Tax Forms To Be Submitted

$8000 First Time Home Buyer Tax Credit and $6500 Repeat Home Buyer Tax Credit Require Tax Forms To Be Submitted

Q: I read your recent article “Home Tax Credit Expansion Good News for Buyers.”

We are existing homeowners who have lived in our home over five consecutive years, are within the income limit for married couple, and will be closing on a new home in January, 2010.

What forms are necessary to apply for the $6,500 tax credit and where are such forms available? We would like to apply for this tax credit after we close and take occupancy of the new home in January 2010.

A: You will need a HUD-1 form and a completed IRS Form 5405 (which is currently being revised by the IRS, but should be ready by mid-December).

The HUD-1 form is the closing statement prepared by your title company, escrow agent or settlement agent that will handle your closing. You should receive the HUD-1 form at the closing and will need it to prove to the IRS that you actually purchased a new home.

The HUD-1 statement will include the purchase price for your new home and will insure that purchase price is no more than $800,000, qualifying under the rules for the home buyer tax credit.

In addition to the closing statement from your purchase, you will need to fill out and attach IRS Form 5405. If you use tax preparation software, you will likely see the form included in the software package. If you prepare your own taxes by hand, you may have to download the form from the IRS website. And, if you use a tax preparer, that person should have the form to attach to your tax return.

If you are closing on a newly-built home, you should remember that the IRS time period starts from the day you close and occupy your home and not from the day you close on the loan for the home.

I have received a large number of questions from readers asking whether they will qualify for the tax credit if they purchase land and obtain construction financing for them to build their new home. In the case of a new home that will be built, the IRS isn’t interest in when you close on the loan but when you start using the home as your principal residence.

To qualify for the tax credit, it’s not enough to close on a construction loan. You will actually need to move into the property as your primary residence as of the date of closing.