Home Buyer Tax Credit Set to Expire

by Joel Barkman

As the April 15 deadline to file 2009 federal tax returns has come and gone, but the National Association of Home Builders (NAHB) is still providing answers to some of the questions home buyers are most frequently asking about the home buyer tax credit.

The NAHB web site that provides information about the home buyer tax credit, www.FederalHousingTaxCredit.com, has received more than 8 million visits," explains NAHB Chairman Bob Jones. NAHB is doing everything it can to make sure home buyers are informed about this outstanding opportunity to benefit from buying a home before it expires April 30.

Some of the more commonly-asked questions, and the answers, include:

How does a home buyer claim the tax credit?

The credit is claimed when the home buyer files or amends their federal income taxes. For qualifying homes purchased in 2009 or 2010, the taxpayer must complete IRS Form 5405 and attach a copy of the settlement statement. In most cases, the settlement statement is a properly executed Form HUD-1.

In circumstances where a HUD-1 is not provided, such as purchasing a mobile home or a newly constructed home, the IRS will accept an executed retail sales contract (mobile homes) or a copy of the certificate of occupancy (new homes).

Does the home buyer have to sell their current home in order to qualify for the $6,500 repeat home buyer tax credit?

A home buyer does not need to sell their current home in order to be eligible for the repeat buyer credit. They can continue to own both homes, and rent or use their former home for something else, as long as it no longer serves as their principal residence. The taxpayer is required to use the new home as their principal residence, and live in it for at least 36 months, or they will have to repay the credit.

Do married couples both have to meet the eligibility requirements in order to claim the credit, even if they file taxes separately?

Both spouses must fully meet all the eligibility requirements for either the $8,000 first-time home buyer tax credit or the $6,500 repeat buyer tax credit, regardless of if they file joint or separate tax returns. However, if an unmarried couple purchases a home and only one person qualifies, the eligible person may claim the full credit.

Do all home purchases need to be completed by April 30, 2010, in order to be eligible for the credit?

There are two exceptions to the April 30 deadline. If the buyer enters into a binding contract by the deadline, they have until June 30, 2010, to complete the purchase. The deadline has been extended a year, to April 30, 2011, for members of the uniformed services, Foreign Service or employees of the intelligence community who have been on qualified extended duty outside the United States for at least 90 days between January 1, 2009, and April 30, 2010.

NAHB's Web site www.FederalHousingTaxCredit.com provides information including eligibility requirements for the $8,000 first-time home buyer and $6,500 repeat buyer tax credits, detailed question and answer sections, and links to additional home-buying resources for consumers.

Remember, the information provided here should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action on this information, you should consult a qualified professional adviser.

Like your local Realtor for example. Many of the homes on the market are "short sales" and for these transactions you need to be prepared - with a whole lot of patience and with expert representation.

However, representation is good practice for any real estate transaction. I often refer my clients to Tom Campbell of Long & Foster. He is an award winning member of the Greater Piedmont Area Association of Realtors and is Short Sale and Foreclosure Certified by the National Association of Realtors.

Another piece of advice that home buyers need to remember is that even though the tax credit is about to expire, conditions remain ideal to buy a home. There are plenty of existing homes on the market, interest rates are at near-record lows, and prices are very competitive.

When it comes to building your next home or buying before the deadline, remember - just "Ask a Builder."

As always e-mail your questions or comments to joel@goldenrulebuilders.com or write to "Ask a Builder" at P.O. box 294, Catlett, VA 20119.

Barkman is past president of the Fauquier Chapter of The Northern Virginia Building Industry Association.

Read Joel's column weekly in the