If you haven’t heard, there was this huge commotion over the first time home buyer tax credit. The commotion went a little something like this: Free Money!!!! If you bought a home for the first time in your life during the 2009-2010 home buyer tax credit days, you received or will receive $8,000 from the government.
But Did You Read The Fine Print?
Did you know that if you received the tax credit or are planning on receiving the credit, you have to pay it back if you move within three years. You even have to pay it back if you keep the home you got the credit on, but rent it out.
If you change primary residences from the home you bought to get the credit, even if you still own the home, you have to pay it back. That’s right. If you move within 3 years, you pay back all of the credit, or you could face some heavy penalties.
How Long Do I Have To Pay It Back?
You have until the day your income tax return is due in the year that you no longer used the home as your primary residence. It must be paid in full! If you are planning on using the credit, be sure that you know the consequences of it.
Still interested in the credit? Then you may need to know this:
How Do I Claim The 2009-2010 Home Buyer Tax Credit?
- If you meet the requirements to claim the tax credit, you have to use a form called Form 1040 (reported on line 67 of the 2009 return).
- You must attach Form 5405
- You must include documentation of your eligibility for the credit showing the purchase of your home with the correct dates.
- You also have to file a paper return; not electronic.
If you’re claiming the Move Up Home Buyer Tax Credit, you also have to include proof that you owned a home for at least 5 years of the past 8.
How Do I Prove I Bought A Home?
To show proof of the purchase of a home, you have to attach your settlement statement to the form. This should be a HUD -1 document that includes:
- The names and signatures of all parties involved
- The address of your home
- The price you paid
- The date of the purchase (date of closing and funding)
If you bought a mobile home without a settlement statement, you need to attach whatever document you used to purchase the home with the same information that is required with a HUD. If you are buying or bought new construction, make sure to attach a copy of occupancy permit.
How Do I Prove I Lived In A Home For 5 Years?
In order to qualify for the move up tax credit, you have to have owned a home for at least 5 years of the last 8 years. These years do not have to be consecutive. You only qualify if the home was your primary residence. You will need to submit these forms to claim the credit:
- Forms 1098, Mortgage Interest Statement, or substitute mortgage interest statements
- Property tax records or
- Homeowner’s insurance records
You don’t have to have all of these documents showing the 5 years. You can use all three as long as you can show, by putting them together, that you have owned a home for at least 5 years.
What’s Real Estate Going To Be Like After The Credit?
If you missed the credit deadline there is no need to worry. The government tax credits, in my opinion, have artificially propped up the market. Some people say that the tax credit didn’t matter, but I beg to differ. At the end of April, the Cache Valley real estate market saw a huge spike in homes going under contract.
In just two weeks, there were 95 homes that went under contract at the end of April, which is usually a month’s worth of activity. Also, the amount of inventory was reduced from over 820 homes on the market to less then 790. The tax credit had an effect on the market, which brought people to buy a home that probably wouldn’t have bought a home otherwise, or at least not for a few more months if not years.
Because the credit sped up peoples buying time frame, just like after the original tax credit was set to expire, we can expect to see home sales decline again as we go into 2011. Which means, even though you may have missed out on the credit, home values are likely to continue on a decline. The declining home values will allow you to make up for the credit by getting a better price on a home.
Also, if you haven’t heard, there are reports of banks holding onto a lot of shadow inventory. We don’t have that big of a problem here in Cache Valley, but across the nation, foreclosure rates are still high, and more people are considering strategic defaults.
In conclusion, claim your credit, and get your money. Just be sure to stay in your home for at least the next three years. If you missed the credit, don’t fret, interest rates are still incredibly low, and home values are still declining, although more slowly then last year.
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