You may be able to take the first-time homebuyer credit if you were an eligible buyer who purchased a home as your primary residence in 2008, 2009 or 2010. Eligibility varies depending upon the year of your purchase. And there are specific benefits that certain members of the military and certain other federal employees have, such as an additional year to buy a home in the United States, if they otherwise qualified for the credit.
This credit reduces your tax bill or increases your refund depending on the tax you owe. The IRS refunds the credit, even if you owe no tax or the credit is more than the tax owed. [Added 1/4/11]
Legislation enacted in July 2010 extended the closing deadline from June 30 to Sept. 30, 2010, for eligible homebuyers. Legislative changes in November 2009 expanded and extended the credit and also added documentation requirements for claiming the credit. Due to increased compliance checks by the IRS, failure to submit documentation will slow down the issuance of any applicable refund.
Repaying the Credit and Understanding your IRS Notice
You purchased your home in 2008
In the fall of 2010 or the first year after you claim the credit, you may have received a Notice CP03A, Repaying your First-Time Homebuyer Credit. This notice listed the amount of the credit you received and the amount you have to repay as additional tax. This notice will no longer be available. Effective Jan. 18, 2012, the First Time Homebuyer Look-up Tool is available to all taxpayers that received the first-time homebuyer credit (FTHBC). This tool will provide your FTHBC account information: the year your home was purchased, the amount of the FTHBC you received, your annual installment repayment amount and your FTHBC balance.
You add the amount you have to repay to any other tax you owe on your federal tax return. This could result in an additional tax owed or a reduced refund. To repay the credit, you must attach a completed Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, to your federal tax return. For example, if you bought a home in 2008 and claimed the maximum credit of $7,500, the repayment amount is $500 per year. If you stop using the home as your main home, generally you must repay the entire remaining amount of the credit for the year the home is no longer your main home. There are some exceptions to this rule.
You will need to access your account information every year to know the correct amount of your repayment that you need to add as an increase in tax to your tax return and to know the remaining amount of the credit you must repay. You can continue accessing your account information until you repay the credit in full, you sell your home, or the home no longer is your main home and you report the sale or other disposition on a completed Form 5405 attached to your tax return.
Find more information on repaying the credit if your home is no longer your main home.
You purchased your home in 2009 or 2010
Generally, you must repay the entire credit for the year you sell the home or it is no longer your main home. There are some exceptions to this rule, however, and you do not need to repay the FTHBC for a home you purchased in 2009 or 2010 if it remains your main home for the three years after the purchase. To repay the credit, you must attach a completed Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, to your federal tax return for the year the home stops being your main home.
Find more information on repaying the credit if your home is no longer your main home.
You sold your main home or the home is no longer your main home
You must report the sale or other disposition of your main home on a completed Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, and attach it to your tax return for the year of the sale or other disposition. The IRS matches information from a variety of sources when your home is sold, destroyed, foreclosed on, or is no longer your main home. If you received the FTHBC and the IRS has information that the home is no longer your main home, the IRS checks your tax records to find out if you reported the sale or other disposition on the Form 5405. You may or may not have to repay the credit, but you do need to report the change to the IRS on the Form 5405. The IRS sends you a CP03c Notice, Important information regarding your First-Time Homebuyer Credit, when it has information your home is no longer your main home and you did not report the sale or other disposition on your federal tax return. This notice reminds you to report the sale or other disposition of your home on the Form 5405.
|You bought a home in 2008 and received the first-time homebuyer credit||You sell the home to a related party within the next 15 years||You must repay the full amount of the credit, reduced by any amount of the credit that you previously repaid. You must complete Form 5405 and attach it to your federal tax return for the year you sold the home to report that you sold the home and to repay the unpaid balance of the credit.* This is required whether you had a gain or a loss on the property.|
|You bought the home in 2009 or 2010 and received the first-time
|You sell the home to a related party within 36 months of buying the home||You must repay the full amount of the credit. You must complete the Form 5405 and attach it to your federal tax return for the year you sold the home to report that you sold home and to repay the credit*. This is required whether you had a gain or a loss on the property.|
|You bought your main
home in 2008, 2009 or 2010
|The home is destroyed or condemned and you do not replace it by rebuilding or buying a new main home within two years of the event||You must repay the full amount of the credit. You must complete Form 5405 and attach it to your federal tax return for the year of the destruction or condemnation of the home to report the destruction or condemnation. You must also complete another Form 5405 and attach it to your federal tax return for the year in which the two-year period ends to report that you did not replace your main home within the two-year period and to repay the unpaid balance of the credit.*|
|You bought your home in 2008, 2009 or 2010||You convert the home entirely to a business or rental property||You must repay the full amount of the credit. You must complete Form 5405 and attach it to your federal tax return for the year you convert the home to report that you converted the home and to repay the unpaid balance of the credit.*|
|* You add the amount of FTHBC you must repay as an increase to tax on your federal tax return. The amount may reduce your refund or increase the amount of tax you owe.|
Deadline for Making Qualifying Purchases in 2010
You must have met the required deadlines to be eligible to claim the credit. For other information on eligibility requirements, see our questions and answers.
- You must have bought — or entered into a binding contract to buy — a principal residence on or before April 30, 2010.
- If you entered into a binding contract by April 30, 2010, you must have closed (gone to settlement) on the home on or before Sept. 30, 2010 (legislation passed in July 2010 extended the June 30 deadline previously in effect).
How to Claim the Credit
2009 or 2010 Tax Return
For qualifying purchases made in 2010, you have the option of claiming the credit on either your 2010 or 2009 return. For qualifying purchases made in 2009, you have the option of claiming the credit on either your 2009 or 2008 return. If your return for a particular year has already been filed, use Form1040X to amend your return for that year, along with Form 5405, First-Time Homebuyer Credit and Repayment of the Credit (see the instructions for help with the form), and a properly executed copy of a settlement statement used to complete the purchase.
- Purchasers of conventional homes should include a copy of Form HUD-1, Settlement Statement, or other settlement statement, showing all parties' names, property address, sales price and date of purchase.
- Purchasers of mobile homes who are unable to get a settlement statement should include a copy of the executed retail sales contract showing all parties' names, property address, purchase price and date of purchase.
- Purchasers of newly constructed homes where a settlement statement is not available should include a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.
Settlement Statement Signatures: While the Form 5405 instructions indicate that a properly executed settlement statement should show the signatures of all parties, the IRS recognizes that the elements of the settlement document, often a Form HUD-1, may vary from jurisdiction to jurisdiction and may not reflect the signatures of the buyer and seller. The settlement statement that must be attached to the return is considered to be properly executed if it is complete and valid according to local law. In locations where signatures are not required the IRS encourages the buyer to sign the settlement statement prior to attaching it to the tax return even in cases where the settlement form does not include a signature line.
Long-Time Residents: The November 2009 legislation extended the credit to long-time residents of the same main home if they purchased a new main home. To qualify, eligible taxpayers must show that they lived in their old homes for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home. For long-time residents claiming the credit, the IRS recommends attaching, in addition to the documents described above, any of the following documentation of the five-consecutive-year period:
- Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements,
- Property tax records or
- Homeowner’s insurance records.
2008 Tax Return
For qualifying purchases in 2008 and 2009, you have the option of claiming the credit on your 2008 return. Homebuyers may use Form 5405 . If your 2008 tax return has already been filed, use Form 1040X to amend your 2008 tax return along with Form 5405.
Details Regarding the First-Time Homebuyer Credit, Expansions and Extensions
For 2008 Home Purchases
The Housing and Economic Recovery Act of 2008 established a tax credit for first-time homebuyers that can be worth up to $7,500. For homes purchased in 2008, the credit is similar to a no-interest loan and must be repaid in 15 equal, annual installments beginning with the 2010 income tax year.
For 2009 Home Purchases
The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases made in 2009 before Dec. 1. The Worker, Homeownership and Business Assistance Act of 2009 extended the deadline — taxpayers who had a binding contract to purchase a home before May 1, 2010, became eligible for the credit. Buyers must have closed on the home before July 1, 2010. That closing deadline was extended to Sept. 30, 2010 by the Homebuyer Assistance and Improvement Act of 2010, enacted July 2, 2010. See news release 2010-80 for details.
For home purchased in 2009, the credit does not have to be paid back unless the home ceases to be the taxpayer's main residence within a three-year period following the purchase.
First-time homebuyers who purchased a home in 2009 can claim the credit on either a 2008 tax return or a 2009 tax return. The credit may not be claimed before the closing date. News release 2009-27 has more information on these options.
For 2010 Home Purchases
The Worker, Homeownership and Business Assistance Act of 2009, signed into law on Nov. 6, 2009, extended and expanded the first-time homebuyer credit allowed by previous Acts.
Under this law, an eligible taxpayer must have bought, or entered into a binding contract to buy, a principal residence on or before April 30, 2010, and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.
This law also:
- Authorized the credit for long-time homeowners buying a new principal residence.
- Raised the income limitations for homeowners claiming the credit.
See news release 2009-108 for the details.
Members of the military, Foreign Service and intelligence community serving outside the U.S. should find out about the benefits in the law that apply particularly to them.
For a home purchased in 2010, the credit does not have to be paid back unless the home ceases to be the taxpayer's main residence within a three-year period following the purchase.
Questions and Answers
More information is available in the question and answer section.
How to Get Help
There are several ways to get help with your first-time homebuyer questions or issues:
- If you have questions about your FTHBC account, call the FTHBC toll free number at 1-800-919-0352. It’s the fastest way to get your questions answered.
- Consult your tax return preparer and/or authorize someone (such as your tax return preparer) to contact the IRS on your behalf.
- You may qualify for help from a Low Income Taxpayer Clinic.
There are several IRS publications that contain helpful information:
- Publication 530, Tax Information for Homeowners
- Publication 523, Selling your Home
- Publication 17, Your Federal Income Tax
- Special Edition Tax Tip 2010-08, First-Time Homebuyer Credit Closing Deadline Extended to September 30, 2010
- IR-2010-6, New Homebuyer Credit Form Released; Taxpayers Reminded to Attach Settlement Statement and Other Key Documents
- IR-2009-83, First-Time Homebuyer Credit Provides Tax Benefits to 1.4 Million Families to Date
- Special Edition Tax Tip 2009-13, Ten Important Facts about the Extended First-Time Homebuyer Credit