Thank you to our friend Drew Stacey of First Place Bank for reminding us of the extension of the The First-Time Homebuyer Credit for the benefit of Military families for an additional year through May 1, 2011.  According to the IRS:

"In general, you can claim this credit if:

  • You bought your main home in the United States after 2008 and before May 1, 2010 (before July 1, 2010, if you entered into a written binding contract before May 1, 2010), and

  • You (and your spouse if married) did not own any other main home during the 3-year period ending on the date of purchase.

 

No credit is allowed for a home bought after April 30, 2010 (after June 30, 2010, if you entered into a written binding contract before May 1, 2010). However, if you (or your spouse) are on qualified official extended duty outside the United States for at least 90 days after 2008 and before May 1, 2010, you have an extra year to buy a home and claim the credit. In other words, you must buy the home before May 1, 2011 (before July 1, 2011, if you entered into a written binding contract before May 1, 2011)."


 

Special rule for long-time residents of same main home.   Even if you are not a first-time homebuyer, you may be able to claim the credit if:

  1. You buy a main home in the United States after November 6, 2009, and before May 1, 2010 (before July 1, 2010, if you entered into a written binding contract before May 1, 2010), and

  2. You (and, if you are married, your spouse) owned and used the same home as your main home for any period of 5 consecutive years during the 8-year period ending on the date of purchase of the home described in (1).

 

  If you (or your spouse) are on qualified official extended duty outside the United States for at least 90 days after 2008 and before May 1, 2010, the above dates are extended to May 1, 2011, and July 1, 2011, respectively.

 

Amount of the credit.   Generally, the credit is the smaller of:

  • $8,000 ($4,000 if married filing separately), or

  • 10% of the purchase price of the home.

However, if the Special rule for long-time residents of same main home described earlier applies, the credit can be no more than $6,500 ($3,250 if married filing separately).

 

Repayment of credit.   If you bought the home in 2009 or 2010, you generally must repay the credit if you dispose of the home or the home stops being your main home within the 36-month period beginning on the purchase date. You repay the credit by including it as additional tax on the return for the year the home stops being your main home. If the home continues to be your main home for at least 36 months beginning on the purchase date, you do not have to repay any of the credit.

 

Exceptions.   The following are exceptions to the repayment rule.

  • If you sell the home to someone who is not related to you, the repayment in the year of sale is limited to the amount of gain on the sale. When figuring the gain, reduce the adjusted basis of the home by the amount of the credit.

  • If the home is destroyed, condemned, or disposed of under threat of condemnation, and you acquire a new main home within 2 years of the event, you do not have to repay the credit.

  • If, as part of a divorce settlement, the home is transferred to a spouse or former spouse, the spouse who receives the home is responsible for repaying the credit if required.

  • If you die, repayment of the credit is not required. If you file a joint return and then you die, your surviving spouse must repay his or her half of the credit if required.

  • If you are a member of the uniformed services, a member of the Foreign Service, or an employee of the intelligence community and the home is sold or stops being your main home after December 31, 2008, in connection with Government orders received by you (or your spouse) for qualified official extended duty service, you do not have to repay the credit. Qualified official extended duty was defined earlier under Sale of Home.

 

Home bought in 2008.   You generally must repay any credit you claimed for a home you bought in 2008 and sold in 2009. There is an exception for members of the uniformed services or Foreign Service and for intelligence community employees if the home was sold in connection with Government orders received by that person (or his or her spouse) for qualified official extended duty service.

 

How to take the credit.   To take the credit, complete Form 5405 and attach it to your Form 1040. Enter your credit on Form 1040, line 67.

 

How to repay the credit.   If you are required to repay the credit, complete Parts III and IV of Form 5405. Attach the form to your Form 1040. Include the repayment on Form 1040, line 60. On the dotted line to the left of line 60, enter the amount of repayment and “FTHCR.”

 

More information.   For more information, see Form 5405 and its instructions.