Attorney Richard D. Vetstein's. office is inundated with last-minute paperwork for last-minute purchases.
• Buyers must have a signed binding contract on or before April 30, 2010, and close on or before June 30, 2010. Buyers will need to attach to their 1040 tax returns a copy of the signed purchase contract and HUD-1 Settlement Statement. There’s been quite a bit of debate as to whether a signed offer to purchase or signed purchase and sale agreements is sufficient for the April 30 deadline. I’ve been erring on the side of caution by recommending getting the P&S signed by Friday, but some realtors and attorneys disagree and say a signed offer is enough. I’d like to see some IRS guidance here. • The maximum credit amount remains at $8,000 for a first-time homebuyer –– that is, a buyer who has not owned a primary residence during the three years up to the date of purchase. • The new law also provides a “long-time resident” credit of up to $6,500 to others who do not qualify as “first-time home buyers.” To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence. • The new law raises the income limits for people who purchase homes after Nov. 6. The full credit will be available to taxpayers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers. Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.
New Requirements Several new restrictions on purchases that occur after Nov. 6 go into effect with the new law: • Dependents are not eligible to claim the credit. • No credit is available if the purchase price of a home is more than $800,000. • A purchaser must be at least 18 years of age on the date of purchase. For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns.
A new version of Form 5405, First-Time Homebuyer Credit, is now available here. http://www.irs.gov/pub/irs-pdf/f5405.pdf A taxpayer who purchases a home after Nov. 6 must use this new version of the form to claim the credit. Likewise, taxpayers claiming the credit on their 2009 returns, no matter when the house was purchased, must also use the new version of Form 5405. Taxpayers who claim the credit on their 2009 tax return will not be able to file electronically but instead will need to file a paper return.
The debate lingers in the legal community about whether an Offer to Purchase qualifies as a binding contract, in the eyes of the IRS. Legal opinions differ there. If I were a buyer looking for the credit, I would get the Purchase and Sales Agreement done by Friday.
Am I being a chicken, or am I showing healthy respect for the wrath of the IRS?
The author is solely responsible for the content.