How to Claim the First Time Home Buyer Tax Credit

The first time home buyer tax credit for 2009 has been extended until April 30, 2010. This credit is designed to give tax payers up to $8,000, or 10% of their home purchase price as fully refundable money.

The 2008 credit for $7500 which must be repaid in 15 installments of $500 per year, starting in 2010 is a different credit. The 2009 credit does not have to be repaid, unless the home is sold within three years of its purchase.

Filing the Tax Credit

In order to claim the first time home buyer tax credit, a person or couple must meet all of the eligibility requirements:

  • Purchase a home
  • Move into the home and begin living in it
  • File a form 5405 with their tax return
  • Not have owned a home in past three years.
  • Not have an adjusted gross income of more than $75,000 if single, and $150,000 if married filing jointly. The adjusted gross income is your income minus any deductions. It determines your tax liability. 
  • Close on the home on or before April 30, 2009 to take occupancy on or before June 30, 2009.

Purchasing a Home

As long as the home is not purchased from a relative-either a direct ancestor or descendant - any home purchased for less than $800,000 qualifies for the credit. The credit also applies to newly constructed homes. The purchase price of the home can include any down payment and closing costs associated with the loan. 

Moving into the Home

When you move into the home, the lender will provide you with a "certificate of occupancy" to prove the home is ready to live in so you will be ready to move into the home and begin living there. You will need this certificate to prove your residency if audited, but it is not required in order to file the credit on your tax return.

Filing a Form 5405

The form 5405 is a simple form to be attached to the tax return. It can also be sent as part of an amended tax return, if necessary. The form is the official form that calculates the total amount of the credit based on the purchase price of the home and the income levels of the people who are filing. 

Owning a Home

If you have owned a home in the past, you can claim this credit as long as it has not been within the last three years. If your name has not been on a mortgage in the last three years, you are a first time home buyer as far as the IRS is concerned. If you do not qualify as a first time home buyer, there is a credit of up to $6,500 for those who are currently home owners looking to replace their primary residence. To qualify for this credit, one must have lived in the same home for five out of the last 8 years, starting on the date of occupancy in the new home.