January 15 Updates for Homebuyer Tax Credits

Although first-time - and even some repeat homebuyers- are eligible for a tax credit, those buying a home after November 6 faced filing delays as they waited for Form 5405 to become available. That form has finally been released and allows both eligible first-time homebuyers and repeat homeowners to file for their tax credit.

Updated details about the availability of Form 5405 and other information is listed here .

Most people buying new homes faced delays if they bought those residences after November 6 (when Congress changed and even expanded the the tax credit). While the new rules allowed even more potential homeowners to participate in the program and extended the original deadline, it also required a special Form 5405 to accompany the paperwork of those filing taxes.

The Good News? Form 5405 is Now Available, Allowing Taxpayers to File The Bad News? Potentially Longer Wait Times for Refunds

Those are the latest updates, partially covered in the earlier article (see link, above). From this point on, taxpayers wanting the homebuyer credits must file paper tax forms. The closest they can get to e-file status is to print out electronic forms found on the IRS website. They can mail those in. After that, they could be waiting months for a return, with the newest batch of credits taking longer to arrive than the earlier ones, those filed before November 6.

Scammers May be Behind New Rules, Stricter Regulations for First-Time Homebuyer Tax Credit

Under the old rules, some people may have tried to scam the system . This has caused problems for everyone filing after November 6 and the newest rules not only require a form (5405) which wasn't available until mid January but now force taxpayers to file electronically. Stricter rules are now in place to prove residency and meet identification standards.

Not everything is negative, though. Those with higher incomes may qualify for the homeowner or home buyer tax credits. Individual taxpayers with modified adjusted gross incomes of up to $125,000 may now qualify. For joint filers, the income requirements may go as high as $225,000 (modified adjusted gross incomes).

First-Time and Long-Time Tax Credit Changes: What Else can Home Buyers Expect?

Because of those who tried to cheat the system, expect to provide more documentation and evidence of an actual home purchase. A binding contract must be in place on or before April 30 and the actual closing must take place by June 30, 2010. Long-time residents can only claim $6500 (this applies to those who are not first-time homebuyers but have owned a home for at least five out of eight consecutive years and are buying a new home). If married and filing separately, the limit is $3250.

If you know someone who was able to file electronically before November 6, be aware that you won't be so lucky. If you purchase a home in 2010, be aware that you have the option of claiming the credit on either your 2009 or 2010 return, allowing taxpayers to choose which year may maximize tax benefits. Expect closer scrutiny of all documentation and be prepared to provide required proof of purchase, meet identification requirements and more. Those owning homes will have to provide real estate tax statements and homeowner's insurance records.

Expect Stricter Proof of Home Purchase and Ownership

Blame it on those who tried to cheat the system. This time around, not only will paper tax forms be required but settlement statements, properly signed and filled out, will also be needed. For those buying mobile homes and new homes, be sure to check here for required documents. If you don't have them, you could be stuck with the cost of a new home and no chance of a tax credit. Although the new and updated rules for both first-time homebuyer tax credits and those affecting long-time homeowners may require more time and effort, the chance for tax scams will be minimized.

Sources
IRS media representative 317-685-7518
10 Important Facts About the Extended First-Time Homebuyer Credit at IRS.gov site here
Homebuyer Tax Credit: no e-file and four-month delays: CNN Money, Jan. 15 here
New Homebuyer Credit Form Released, IRS.gov, here