For those of you planning on buying your first home and qualifying for the $8000 tax credit from the IRS, here’s some information you need to have. You should already know that to qualify for the tax credit, you must be under contract by April 30 of this year, and closed by June 30. Remember that the actual credit is 10% of the purchase price, up to a maximum credit of $8000. Other restrictions may apply as well.
The new information is that in order to file for the tax credit, you cannot file your return electronically. This is because the IRS had to develop a special form for the filing, Form 5405. The form is not available electronically, but can be downloaded from the IRS site and filled out. The other new information is that you need to expect a four month wait for your check once you file. This is because there have been people that tried to cheat the system, and file for an unearned credit. So now the IRS requires proof of residency, signed mortgage statement, and driver’s license, whuch the e-file system is not designed to handle.
So the teachable moment here is don’t spend that tax credit the day after you move into the new home, expecting to have the money in hand before the bill comes due. Talk to your tax accountant about whether or not it makes sense to use the tax credit to offset income tax exemptions in your regular paycheck. I am no CPA, so please don’t make a decision based on what I say, but it seems to me if you qualify for the credit you might want to sit down with someone who knows tax laws and come up with a plan that makes sense for you.
If you haven’t started your search yet for that first home, and would like to know where to begin, email me and I can make some suggestions that might help.