CREDIT FOR HOUSE PURCHASE

I just ran across your website and blog. Thanks for all the information. Maybe you can answer a question for me and my husband. We have owned a house and are looking at purchasing a different home. Do we or don’t we get money from Obama? Thanks in advance.

Yvonne

Yvonne, thanks for the kind words. Unfortunately, with the information that you gave me I can’t specifically answer your question. There have been three different housing credits. Here is some information that may help.

You must buy – or enter into a binding contract to buy – a principal residence located in the United States on or before April 30, 2010. If you enter into a binding contract by April 30, 2010, you must close on the home on or before June 30, 2010.

What is kind of confusing is that there are now two different classifications; First Time Homebuyer and secondly, Long Time Resident Homebuyer.

To be considered a first-time homebuyer, you and your spouse must not have jointly or separately owned another principal residence during the three years prior to the date of purchase. The maximum credit for a first-time homebuyer is $8,000.

To be considered a long-time resident homebuyer you and your spouse must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased. Additionally, your settlement date must be after November 6, 2009. The maximum credit for a long-time resident homebuyer is $6,500.

There are some new reporting requirements. You must file a paper return and attach Form 5405, First-Time Homebuyer Credit and Repayment of the Credit with additional documents to verify the purchase. Therefore, if you claim the credit you will not be able to file electronically. In addition, since the IRS supposedly approved over 79,000 incorrect credits, even giving $8,000 to a 4-year old, supposedly they are now checking the requests closer which could slow down your refund.

In addition, new homebuyers must attach a copy of a properly executed settlement statement used to complete such purchase. Buyers of a newly constructed home, where a settlement statement is not available, must attach a copy of the dated certificate of occupancy. Mobile home purchasers who are unable to get a settlement statement must attach a copy of the retail sales contract.

If you are a long-time resident claiming the credit, the IRS recommends that you also attach any documentation covering the five-consecutive-year period, including Form 1098, Mortgage Interest Statement or substitute mortgage interest statements, property tax records or homeowner’s insurance records.

I hope that this helps.

Larry Kopsa CPA