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Long-time homeowners tax credit

Posted by Andrew Chan  March 17, 2010 02:30 PM

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I bought a new-construction home, unaware of the new "long-time" homeowner provision, and we passed on 11-6-2009 (date of HUD form), but did not move in until the following Monday. Do I still qualify for the tax credit, as I am receiving conflicting opinions? The tax form instructions for the credit seem to indicate I still qualify as long as I move in after the 6th.

On November 6, 2009, new legislation was passed to extend and expand the First-Time Homebuyers credit originally established under the American Recovery and Reinvestment Act of 2009. One of the provisions of the new law allows existing homeowners to receive a tax credit if they purchase a new principal residence to replace their current principal residence. This "long-time resident" tax credit allows taxpayers who have owned and used in their home for five consecutive years out of the last eight years, to receive up to a $6,500 tax credit for the purchase of a new principal residence.

Based on the situation described in your question, I would generally agree that you should be able to qualify for the long-time homeowners credit as long as you meet all of the other requirements for the credit. According to the IRS' guidance for home purchases made in 2009, "a residence which is constructed by the taxpayer is treated as purchased on the date the taxpayer first occupies the residence". The instructions for the tax form used to claim the credit (Form 5405) seem to further support this interpretation by indicating that you should use the date you first occupied your newly constructed home as your date of purchase.

Keep in mind that there are potential conflicting interpretations because your settlement statement (i.e., your HUD-1 Form) is dated before the effective date of the new tax credit provisions. According to the instructions for Form 5405, "if you are claiming the credit for a newly constructed home and you do not have an executed settlement statement, attach a copy of your certificate of occupancy showing your name, the property address, and the date of the certificate". In your situation, I would recommend filing your tax return with both, your settlement statement and a copy of your certificate of occupancy.

Ultimately, I think that there is enough ambiguity in how the new law applies to your situation that you should consult with a CPA or professional tax advisor for their interpretation and recommendations.
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