The Other Side of the Coin

As your parents most likely told you growing up, there are two sides to every coin; and therefore two sides to every story.  On one side we have the home buyer’s tax credit with up to $8,000 available for first-time home buyers and up to $6,500 available for existing home owners.  This has been a great program that has helped many buyers.  Some of our clients have used this to essentially recoup their closing costs.  Others have used this to update or furnish their new homes.  However they are choosing to use the credit, there is money coming their way.

So, what’s the catch?  The other side of this coin is what it takes to actually receive the tax credit.  In mid-January, the Internal Revenue Service released the new Form 5405 for the credit that needs to be included with the buyer’s return.  Along with the form, buyers also need to include proof of residency, the signed HUD-1 statement from the closing, and a copy of their driver’s license.  “Great!” you say.  Not a problem.  However there is one little catch.  Because of this extra documentation, filing electronically will not work – the IRS e-file system is not equipped to handle these pieces.  That means taxpayers with these claims must file a paper return and that means filing via mail.  Filing by mail means it will take time.  For your 2009 taxes this can mean up to 8 weeks for the refund, up to 16 weeks for an amended 2008 return.

 Why the extra hoops here?  The short story is the IRS is requiring more documentation to stop those individuals who have already taken advantage of a good thing and cheated the program.  So now, you need to prove you purchased a home and that this is indeed your home.  Bottom line, the credit is available and a significant value, just don’t spend it before you have it.  Your parents probably told you that one too.

For more information, click here for a link to instructions for Form 5405.

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7 Responses to “The Other Side of the Coin”

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  5. Common Homeowner Tax Deductions « Awareness Home Funding's Blog Says:

    […] Home Buyer’s Tax Credit  –  Home buyers may be eligible for a tax credit of 10% of the purchase price of their newly acquired home.  First-time buyers may be able to claim up to $8,000; existing home owners may qualify for up to $6,500.  We have provided some information on this program in two separate articles (No Time Like the Present and The Other Side of the Coin). […]

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