New IRS guidelines for Home Buyer Tax Credits

The Internal Revenue Service (IRS) has its new guidelines on how to ensure you get either the “first time” home buyer or “repeat” buyer tax credit.There’s specific documents your Tax Advisor needs to submit in order to get it!

If you forgot, the federal tax credit for home buyers was extended and expanded late last year, and will be for good either first time home buyers or repeat buyers that purchased and closed their escrows by April 10, 2010. Qualified first-time buyers may be eligible to receive a tax credit of up to $8,000 and repeat buyers may be eligible for a tax credit of up to $6,500.

To receive the tax credit, home buyers must comply with the IRS’s documentation requirements, including a fully executed IRS Form 5405.  On the form, which is available on the IRS’s Web site, taxpayers provide information supporting their claim of eligibility, such as income and home purchase date.

The IRS also requires home buyers to submit a copy of the closing or settlement statement that proves the transaction took place. The IRS previously said that the statement should show “all parties’ names and signatures, property address, sales price, and date of purchase.”  However, since closing or settlement statements vary by state, and in some cases the form does not include both the seller’s and buyer’s signatures, the IRS has revised this requirement.  As long as the closing or settlement statement conforms to prevailing local practices, the IRS will accept it.

One stipulation for repeat buyers is they must provide documentation they lived in their former property for a consecutive five years out of the previous eight years. Accepted documentation may include property tax records, hazard insurance records, or copies of annual mortgage interest statements filed with their federal taxes.

I’ve included the link below so that if you’re doing it yourself, you can look into it or you can forward the link to your Tax Advisor.

First-Time Homebuyer Credit: Answers