Homebuyer Tax Credit Questions Answered by Bob Meighan

Yesterday we held a live Q&A chat on our Facebook Wall with Bob Meighan, CPA and VP of TurboTax, about the Homebuyer Credit on the TurboTax Facebook Page.

Below, we summarize TurboTax Facebook Fan questions and answers by Bob. In fact, it was such a popular one participant and blogger summed it up on his blog, Mortgage Report.

We decided to solicit a couple of additional questions about the Homebuyer Credit via Twitter, and Bob’s responses to those new questions are below. At the end of the post, you’ll see the full list of Q&A from yesterday’s chat, or take a look on the Facebook Page. For an in-depth overview of the Homebuyer Credit, check out this post by Bob on our blog.

Twitter Questions:

Q. My wife & I purchased our home last month. Should we amend our taxes our wait till we do our taxes in March/April?

A. Because it sounds like you purchased your house after Nov. 6, you’ll have to file for the Homebuyer Credit on your 2009 return. Along with the return, you’ll have to include the settlement statement to support the claim for the credit. Filing an amended 2008 return is not an option because of when you purchased your home.

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Q. My former home owner wrote a check for property tax, but I purchased before tax date and reimbursed. Did he pay the tax or did I?

A. The settlement statement will show the proportionate tax applicable to the seller and buyer (you). Even though the former owner paid for the full year, your reimbursement for the months you lived in the house qualify you for a deduction for that amount you paid.

Facebook Questions:

Q. What if a buyer’s federal tax obligation is less than the tax credit? Does the buyer receive the full amount or just an amount up to his/her federal tax obligation?

A. The Homebuyer Credit is a “refundable” credit, which means that you get the full credit regardless of your tax liability. In other words, the IRS will send you a check if your credit is more than the tax liability/withholding.

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Q. What will be the earliest day I will be able to file online this year?

A. TurboTax Online is up and running now. While not all IRS forms are final yet, most should be final by Jan. 1, 2010. So get ready and get going. By the way, if you’ll be claiming one of the Homebuyer Credits, you may have to wait a few weeks because the credit form for this won’t be final from the IRS until sometime in January.

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Q. Can you tell folks the top 3 things EVERYONE should know about this credit?

A. 3 things you need to know about the Homebuyer Credit:

1. The credit is available to first time AND existing homebuyers. The credit amounts are $8000 and $6500 respectively. And pay attention to the rules. For example, a first time buyer simply means you have not owned a principal residence in the last three years.

2. The purchase date has been extended to June 30, 2010, but you have to have a signed contract in place by April 30, 2010.

3. Those claiming a Homebuyer Credit on their 2009 return will have to paper file the return. The IRS will NOT accept the return electronically because they need a copy of your settlement statement to substantiate your purchase. Having to file a paper copy of your return is big disappointment because it will delay your refund from days to weeks.

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Q. If the transaction closes on or after Jan. 2, 2010, can the home buyer still claim the tax credit on their 2009 tax return? If the transaction closes after April 15, 2010 (but before June 30, 2010), would they file an amended return for 2009?

A. The beauty of the Homebuyer Credit is that you can get the credit dollars pretty fast. So, if you purchase in 2010, you have the option to claim the credit on your 2009 return (either the originally filed one or even an amended return). By doing so, you get your credit dollars relatively soon versus having to wait to claim the credit on your 2010 tax return which would be filed in 2011.

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Q. Would a current homeowner be eligible for the extended Homebuyer Credit if they purchased a second home in another state this year? They did not sell their current home, but were told by their Realtor that they can claim the credit.

A. As long as you owned and lived in the existing home for at least five consecutive years of the eight years prior to the purchase date of your new home, you may qualify. There are other requirements like income and purchase price, but otherwise you should qualify. By the way, there is no requirement that you sell your existing home.

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Q. Just sold a piece of farm land that was part of an inheritance. I will have to pay Capital Gains tax. Do I have to pay an estimated tax in January for this tax?

A. Depending on the amount of the gain, you may have to pay estimated taxes by Jan. 15, 2010. It all depends on how much the gain was. There are (complicated) rules that govern whether you have to pay estimated taxes. For example, if your tax payments (like withholding taxes) by end of year cover 90 percent of your tax liability for 2009, you more than likely will not have to pay estimated taxes. Any balance you owe would be paid at the time you file your return. Also, for most filers, if the taxes you paid by end of year equal or exceed your 2008 taxes, then you won’t have to pay estimated taxes. Without knowing more about your specific tax situation, I’d guess that you will not have to pay estimated taxes. I would suggest, however, that you use TurboTax now to find out if you’ll have to pay estimated taxes.

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Q. Can [you] file [through] Turbotax.com with the Homebuyer Credit [or do you] need to go [through] [H&R] or [Hewlitt Packard]?

A. You can use any version of TurboTax to claim the first time Homebuyer Credit. However, you won’t be able to file until sometime in January when the IRS releases the final form for claiming this credit. Also, those claiming the credit will have to paper file their return because of the IRS requirement to attach your closing statement. This paper filing requirement is true for ALL filers, regardless of whether you use tax software or go to a pro.

Comments (34) Leave your comment

  1. i purchased my home in11/2009 and recieved the $8000.00 homebuyer credit. forclosure started in august 2012 but is not yet final. do i have to repay the credit

  2. I DID NOT FILE BY 4/15/2101; HOWEVER I DID FILE EXTENSION. SO WHEN WILL BE MY DEAD-LINE TO FILE MY REAL 2010 TAX RETURNS? IS IT BY THE END OF OCTOBER? PLEASE ANSWER ME.
    THANKS A LOT FOR QUICK ANSWER FOR ME TO BEAT THE DEAD-LINE

    • Hi Sang,
      If you did not file your 2010 taxes by the April deadline, but filed an extension, your final deadline to file was October 17th. Don’t worry you can still file by using TurboTax desk top download. You will have to paper file your return, as TurboTax and the IRS shut off e-file to prepare for the 2011 tax season.

      I hope this helps you!
      Thank you,
      Lisa Lewis

  3. if i added a wood burning stove to my home in 2010 can those expenses be used for the home energy credit?

  4. Hi

    I owned a house for over 5 years with my ex-spouse. We got a divorce in January, and I had to refinance the house in my name. It was part of our settlement that I got the house. Does this count for the existing homebuyer credit?

    thanks!

  5. I file my amendment for the first time home Buyer Tax Credit four weeks ago by mail and did not receive any acknowledgement that they have received my paper work. Do I suppose to receive anything and how long does it take?

  6. I got the tax credit but got married and moved out. Is the payback prorated for the year I have lived there or do I have to pay back the full $8.000??

    Thanks for your help!

  7. I rec’d the existing credit this past January and we are going to hve to move to another state. How do they charge in our payback of the credit due to our not staying in this home the 3yrs?
    Thanks for your help!

  8. In 2007 I bought vacant undeveloped land as an investment. I signed a contract for deed and when tax season came around I used turbotax and entered my W-2s and Form 1098 from the land deal. The land purchase was in another state, I lived in an apartment. In late 2008 I lost my land due to theft (long story), so I sued and won the case. In May 2009 I bought my first house ever and filed for first time home buyer’s credit. But, the IRS has just issued me a letter stating my Form 1098 in 2007 shows my primary residence as teh vacant land. I never stated this vacant land investment as a primary address. How can i show the IRS I qualify for the first time home buyer’s credit?

  9. Thanks for the good information on homebuyer’s tax credit. I am planning on purchasing a home this year and this will really help. Thanks!

  10. Hi,

    Our second offer was intiated on Nov 06, 2009 and accepted on Nov 07, 2009. Was this a binding contract? The closing happened on Dec 01, 2009. The home price was $850,000. We are within the income limits either before or after Nov 6, 2009.

    Do we qualify for the credit? Is it the binding contract or the closing that has to be on/before Nov 06, 2009?

    It looks like we missed the deadline by a whisker and feel terrible.

    One of the main reasons to buy the home in 2009 was the tax credit.

    Thanks a lot

  11. My 2010 Tax Refund came without first time home buyer credit. When I checked the IRS website, it said they send me a letter requesting more information. Is this usual? Do they give regular tax return first if they need more information for first time home buyer credit?

  12. My husband and I are buying a “upgrade” house, but have only owned our current house for 4 years 7 months so we will not qualify for the tax credit, right?

    That stinks!

  13. We filed our taxes with turbotax online, and of course we can’t e-file because we need to send in specific paperwork. Out of the huge stack of papers we signed when we purchased our house, I’m not sure which one is the Home Purchase Settlement Statement. Can you advise me what to look for?

  14. Sorry I missed the Facebook discussion yesterday. I have a relevant question for Bob Meighan.

    My college age son (who is my dependent and goes to school in another state)& I purchased a condo in May 2009 near his university and allocated all the credit to him on a 2008 tax return filed in July 2009 (as allowed, 2009 purchase deemed on 12/31/2008). IRS first denied due to my address on son’s return. Fixed the address issue and submitted more documentation. Now IRS has denied credit again because “Records indicate your father claimed you as a dependent on his 2008 tax return. Therefore your primary residence is considered the same as your father. Since your primary residence is not the same as the property you are claiming, you do not qualify for the credit.”

    I am going to stop fighting the 2008 return and apply for the credit on son’s 2009 tax return. I don’t want to not claim him as a dependent on my 2009 tax return for obvious reasons. I believe the IRS is in error in their position. The purchase was before Nov 2009, so the dependent status does not apply to our case. In the IRS published faq’s there are examples of parent’s helping children buy homes and giving all the credit to the child, but no mention of the dependency issue. I’ve read there has been fraud claims by others with young children getting the credit which is why they put in the dependency clause in Nov 2009, but in our case, the child is an adult.

    However, the IRS taking the position about that college student’s personal residence is deemed the parent’s is nonsense. Being away at college meets the definition of temporary absence which is allowed in the steps to determine who is a dependent. The instructions for the form 5405 and FAQ section on the IRS website uses the terms “main residence”, “primary residence”, and “personal residence” interchangeably. We have plenty of proof that the condo is son’s residence.

    I would really appreciate knowing if others who are trying to get the credit are having the same issue with the IRS denying credit to adult homebuyers before November 2009 who are claimed on someone else’s tax return. I am a CPA, but not a tax CPA, so I rely on TurboTax to guide me and it is allowing this credit to go through on son’s 2009 return.

    Thank you.

  15. We took the Home Buyers’ Tax Credit of $7500 in the Taxreturn in Jan. 2009. We need to pay $500 back from this year. Last week, I used the TurboTax-basic to apply the tax return. But I couldn’t find where to submit this $500 payment. Can you please show me where to pay this $500 through TurboTax?

  16. My 90-year old mother came to live with me this year. We are still trying to sell her Florida home but I am covering all her expenses – housing, food, unpd medical, etc. She does not file a tax return as her only income is monthly Railroad Retirement Benefits. Can I claim her as a tax exemption? What is the criteria – what proof do I have to provide.

  17. Are there any military exclusions for the 5 consecutive years (it is rare for a military officer to stay in one place beyond 3 years)? We’ve had to move on orders every 2 to 3 years, but we have owned our house for 8 years. So basically, we’ve lived in our house for 5 years, but due to military orders they haven’t been consecutive. We lived there for 3, then moved to a different base for 2 years, then moved back for 2, etc. Do we qualify?

  18. Brian (post 1/19/10)… You are correct. I should have said you cannot file an amended return in this situation using the 2008 TurboTax software. That’s because the 2008 TurboTax software does not have the revised Form 5405 that one would need in this situation.

    I don’t think amending at this time is advisable even though you can file an amended 2008 tax return. The reason is that the IRS may take between 12 – 16 weeks to process an amended return. You’d be better off filing for the homebuyer credit on your 2009 return (even with the IRS’ announcement that it will not begin processing returns with this credit until mid-Feb).

    Brian, thanks for your eagle eyes and sharp mind.

    Bob Meighan

    VP, TurboTax

  19. I own a home for the last 5 years and 9 months and lived in it for 1 year and a half and the military made me move to virginia and have been here now for 5 years and they will keep me here for another 3 years so I just bought another home in virgina and am trying to sell that one in chicago. Am I elgible for the second time home buyer credit of 6500.

  20. Under the twitter feed, Bob said “Because it sounds like you purchased your house after Nov. 6, you’ll have to file for the Homebuyer Credit on your 2009 return. Along with the return, you’ll have to include the settlement statement to support the claim for the credit. Filing an amended 2008 return is not an option because of when you purchased your home.”

    Given that last month (at the time of this post) was December 2009, I believe Bob is wrong, and the IRS’s own documentation appears to support my belief.

    From the instructions for the revised form 5405 (home buyer tax credit form for purchases after Nov. 6, 2009 available at http://www.irs.gov/pub/irs-pdf/i5405.pdf?portlet=3 at the bottom of page 1): “This revision of Form 5405 can be used to claim the credit only in the following situations.

    You are claiming the credit on your 2008 original or amended return for a home you purchased in 2009.

    OR

    You are claiming the credit on your 2009 original or amended return for a home you purchased in 2009 or 2010.”

    Bob, can you explain or correct your previous statement?

    • Hi @Mariusz, I’m not sure if I follow your qiutseon. If you owned a home in 2007 and were foreclosed on, then you wouldn’t be eligible for the first-time home buyer tax credit, since you would have owned a home you lived in within the past three years. If you lived in that home for more than five consecutive years out of the last eight, you could be a long-time homeowner. But if what you’re saying is that you BOUGHT a foreclosure in 2007, then it’s not likely you’d be eligible, again because you fail the three year test and most likely fail the five year test.

  21. If I took the new homeowner credit ( Govt Loan) on last years takes can I still take the NEW credit for first time homeowners this. seeing how last years was a loan and this years is an actual credit they are different right?

  22. I was wondering if i needed to wait to get the form for my home to file my taxes if ive never qualified for any credits or points from owning my home? I live in Texas and ive been in my home for almost 10 years

  23. I was wanting to know on this Home Buyers tax credit, do you actually get money from your return off thus or what is the puropse of this, if you already have a home.

  24. I had a foreclosure on a property, beginning date of proceedings was April 2007, final in November 2007. We are currently building a new home, we will close in May or June 2010. Will I qualify for the new homebuyer tax credit or is that not quite three years? I have not lived in that foreclosed property for 4.5 years. thanks

  25. Charmane… I assume you took the Homebuyer Credit of $7500 in 2008 for a purchase in the same year. If so, you cannot now avail yourself of the higher homebuyer credit. Your credit amount is determined at the time you purchase your home. Also, if this is indeed a 2008 purchase, the $7,500 credit must be paid back beginning on your 2010 tax return (not the 2009 return that will be filed in the next few months). That means you’ll have to pay back $500 in your 2010 return.

    Bob Meighan

    VP, TurboTax

  26. We took the Home Buyers’ Tax Credit of 7500. We need to add an additional $500 to our credit liability for this year. Can we do this using Turbo Tax or do we need to file by mail?

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