The IRS First-Time Homebuyer Credit Form 5405

The IRS has officially released Form 5405 for the first time home buyer tax credit included in the American Recovery and Reinvestment Act of 2009.

To determine your eligibility for the $8,000 tax credit you simple fill in the 10 fields on the form. The IRS was nice enough to include 3 pages of instructions to help answer your questions regarding the First Time Homebuyer Credit.

Included in these instructions is the definition of a first time homebuyer. According to the IRS, a first time home buyer is someone that hasn’t owned a primary residence in the last 3 years.

The IRS also makes clear the fact that not every first time home buyer will qualify for the tax credit. Would be home buyers will not qualify if they:

1. Acquire the home from a family member
2. Acquire the home from a business in which they are a majority owner
3. Acquire the home from an inheritance or gift

Even if you are eligible for the credit you may not receive the full $8,000 credit. There are two reasons that you may not receive the full credit. First, the tax credit is limited to 10 percent of the purchase price. For example, if you purchased a home for $55,000, you would receive a maximum credit of $5,500.

Second, the tax credit phases out as income levels increase. If you file separately, the credit phases out at $75,000 and at $150,000 for those first time home buyers filing jointly.

If you determine that you are eligible for the tax credit, remember that you must stay in the home as your primary residence for three years or you will be required to pay back the tax credit in full.

For more information regarding how the IRS Form 5405 is applicable to you, I would recommend contacting your accountant. Call or email me if you need a recommendation for a professional accountant.

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