Clients who have taken advantage of the homebuyer tax credit may be calling with questions about how to claim the credit on their taxes.

The IRS has released IR-2010-006, providing a revised Form 5405 to reflect the changes to the tax credit made in the extension and expansion legislation enacted in November 2009.

The release reminds taxpayers that all tax returns claiming the tax credit must be filed manually (i.e., they cannot utilize the IRS E-file automatic system). The revised form includes a section for those repeat buyers who are eligible to claim the $6,500 tax credit. The HUD-1 or evidence of the transaction must be filed with all returns claiming the credits (both the $8,000 and $6,500 credits). Individuals who claim the repeat buyer credit must also provide evidence that they have owned and used the prior residence for five consecutive years. The instructions indicate that property tax or homeowners insurance records are sufficient for this purpose.

Read the entire IRS release with instructions and forms here. For up-to-date news on the extended and expanded tax credit, go here.

The Economic Stimulus Bill (The American Recovery and Reinvestment Act of 2009, H.R. 1.) was signed into law on February 17. Many elements of NAR's housing agenda were included, including an $8,000 first-time homebuyer tax credit. Originally available only through November 30, 2009, Congress has voted to extend and expand the homebuyer tax credit to continue to stimulate housing and improve our economy. 

 

Under the bill:

 

• the current $8,000 tax credit for first-time homebuyers has been extended through April 30, 2010
• current homeowners are now eligible for a $6,500 tax credit through April 30, provided they've lived in their existing home as their principal residence for five consecutive years in the past eight years
• if potential homebuyers have a binding contract on or before April 30, 2010, they have until June 30, 2010 to close the transaction
• the annual income limits for full-credit eligibility are raised from $75,000 to $125,000 for singles and from $150,000 to $225,000 for married couples.  Buyers with incomes $20,000 higher than these limits may qualify for a partial tax credit. These income limits apply for BOTH first-time buyers and current homeowners.

 

For more information about the extended and expanded tax credit, including a comparison chart and Frequently Asked Questions, go here for info posted on realtor.org.

The National Association of Home Builders has posted a list of FAQs here and this video which also addresses common questions:

 

Other key points of the legislation:

• The $6,500 tax credit for eligible existing homebuyers went into effect immediately after the President signed the legislation earlier today. All closings taking place from November 7, 2009 until the deadlines above qualify for the tax credit.
• Existing homeowners do not need to sell their current home to claim their credit, but they must occupy the new home as their principal residence. They can keep their current home as an investment property or second home.
• To listen to a special podcast from NAR President Charles McMillan, go here.

SPREAD THE WORD!

KCRAR has created fliers you can use when speaking with prospects and clients about the tax credit.

Go here for a flier with information about the credit for both first-time buyers and current homeowners.

Go here for a flier that's about the tax credit as it applies to first time homebuyers.

Go here for a flier that's about the tax credit  as it applies to existing homeowners.