There have been many laws passed over the past couple of years to provide tax credits for home buyers. Some of the laws were targeted to offer tax breaks for the first time home buyer; others were targeted at providing tax credits for previous homeowners. To receive the credit, the homeowner must claim it on their individual income tax return using IRS tax form 5405, First-Time Homebuyer Credit and Repayment. An overview of the home buying credit filing instructions and the rules to qualify for the credit are discussed below.
Home Buyer Credit Tax Form
The first time home buyer credit and credit for existing homeowners is claimed on IRS tax form 5405, First Time Homebuyer Credit and Repayment. Qualifying home buyers should file this tax form along with their individual income tax returns. In addition to filing this form, the following documents must accompany the return:
- A properly executed copy of a closing statement (normally HUD-1, Settlement Statement). For mobile home purchasers, if no HUD-1 is available then an executed copy of the retail sales contract showing all parties’ names and signatures, property address, purchase price, and date of purchase should suffice.
- For existing or previous homeowners, in addition to providing the HUD-1, documentation proving ownership during the 5-year consecutive period (out of the last 8 years) should be included. Examples of such documentation include: property tax records, homeowners’ insurance records, mortgage interest statements, etc.
Important Note: Homeowners claiming this credit must keep the home attached to the claim as their primary residence for at least 36 months or the homeowner may be required to repay the home buyer credit. Also note that there are special tax rules for unmarried couples who wish to claim a home buyer credit.
