First, when filing for your credit, be aware you must file on paper. No electronic filing is allowed. You can access the forms via IRS Free File or any off-the-shelf program, but you must send in the paper copy to the IRS.
Why is that, you ask? Isn’t electronic more eco-friendly? Yes, it is, but apparently is more fraud-friendly, too, as about 90,000 fake claims were filed last year.
As mentioned in a previous post, the credit is up to $8,000 for a first-time home buyer and up to $6,500 for a repeat buyer. Remember a tax credit is much better than a deduction. A tax credit triggers a refund if you have already paid enough tax.
So, what do you have to file to get this great deal?
All taxpayers (first time and repeat buyers) seeking a credit or refund, must use the new IRS Form 5405 entitled “First-Time Homebuyer Credit and Repayment of the Credit”. Not to worry. That ominous term, “repayment,” in the title refers to the provision that taxpayers must pay back the credit if they sell the home within three years. Check out IRS Form i5405 for the instructions to fill out the form.
In addition to Form 5405, taxpayers must also include at least ONE of the following documents:
• A copy of the HUD-1, Settlement Statement, showing all parties’ names and signatures, property address, sales price, and date of purchase.
• For mobile home buyers who don’t get a settlement statement, a copy of the executed retail sales contract showing all parties’ names and signatures, property address, purchase price and date of purchase.
• For new home buyers who don’t get a settlement statement, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.
Existing home owners applying for the $6,500 maximum tax credit must additionally prove they lived in their old home for the required period.
To do so, options are:
• File IRS Form 1098, “Mortgage Interest Statement.” IRS Form i1098 offers the instructions.
• Also, supply mortgage interest statements or property tax records or homeowner’s insurance records.