Home buyer tax credits: a primer for procrastinators
Although the IRS is gung-ho about electronic filing in most cases, it's requiring the home-buyer tax credit information to be filed in paper form, Form 5405 to be exact, along with copies of various documents proving you bought your home and qualify for the credit of up to $8,000.
"Isn't that bizarre?" asked Tara-Nicholle Nelson, a San Francisco real estate broker. "We in real estate are used to bizarre, archaic things (but) most of the home buyers I know are a little startled by it."
The requirement is part of an effort to avoid fraud, such as the now-famous instance of 4-year-olds ostensibly buying a first home, which have led to hundreds of federal investigations into people filing for a home-buyer tax credit..
The good news for procrastinators is you can file your regular taxes electronically and follow with an amended return that includes the tax credit information. This also helps those who have entered into a contract to buy a home (which must be done before April 30) but have not closed (the deadline for that is not until June 30). California recently announced an extension of the program beginning May 1 and Nelson said other states may follow suit.
The additional documents required to file for the federal credit include a signed copy of the HUD-1 Settlement Statement or, for new homes, an occupancy permit. Details of who qualifies for the credit are relatively simple: first-time buyers can qualify for up to $8,000 depending on their income and home owners who move into a new home can qualify for up to $6,500. But there are a number of wrinkles to both qualification and documentation outlined in this helpful piece by Susan Tompor, personal finance columnist at the Detroit Free-Press.
Nelson has found herself advising her clients about the ins and outs of the credit over the past year and she blogged about it recently on the real estate site Trulia.com. With months of experience behind them, real estate agents, she said, ought to be a good source of information.
So has the credit worked as intended, bringing buyers into the market? Based on personal experience, Nelson doesn't really think so. "I wouldn't say anybody bought who would not have bought otherwise," she said. "But it helped people make that decision a little bit more quickly, it got them off the fence."