IRS 6500 Tax Credit for Home Purchase: Home Credit Rules – Existing Homeowners’ Federal Tax Incentive

The Worker, Homeownership, and Business Assistance Act (H.R. 3548), signed by President Barack Obama on November 6, 2009, extended federal unemployment benefits for some Americans, extended and enhanced the tax credit for home purchases, and gave businesses tax breaks through net operating loss carrybacks.

Existing Homeowners Can Get IRS 6500 Tax Credit for Home Purchase

In this article, learn more about the home buyer tax credit provisions of that act and find out when to expect revised Form 5405 to be available on irs.gov.

Extended Home Purchase Credit & 6500 Federal Tax Credit

H.R. 3548 builds upon previous legislation to extend and enhance tax credits available for home purchases in the United States. The Housing and Economic Recovery Act of 2008 originally established a $7,500 first-time home buyer tax credit, and the American Recovery and Reinvestment Act of 2009 enhanced that benefit, increasing the amount to $8,000 and changing the qualification and repayment rules. H.R. 3548 extends the $8,000 first-time home buyer tax credit into 2010 and opens the federal government incentive program to existing homeowners as well.

$7,500 & $8,000 First Time Home Buyer Tax Credits Before Extension

Individuals who purchased homes before November 7, 2009 must adhere to the qualification rules that existed before H.R. 3548 took effect.

To read detailed information about the rules that existed prior to the enactment of H.R. 3548, see the following two articles:

Government Incentive Program Changes – New 6500 Tax Credit Rules

For home purchase transactions that occurred after November 6, 2009, slightly different rules apply. The article $6,500 Tax Credit for Home Buyers discusses these changes in detail. To summarize, H.R. 3548 changed the following:

  • An age limitation was set
  • A maximum purchase price was set
  • New tax credit deadlines were established
  • Income limitations were raised (allowing individuals with higher incomes to qualify)
  • A proof of purchase documentation requirement was established

Review Rules for 2010 Home Credit in Revised Form 5405

Form 5405 should be used to claim all versions of the first time home buyer tax credit ($7,500, $8,000, and $6,500); however, the 2008 version should be used for home purchases made through November 6, 2009. The 2009 version (not yet released by the IRS as of January 6, 2010) should be used for home purchases made after November 6, 2009.

According to the IRS, the 2009 version of Form 5405 should be posted on irs.gov on or before January 8, 2010. Rules for the $6,500 credit should be described succinctly in this document.

Claim $8,000 & $6,500 Home Credits on 2009 or 2010 Tax Returns

Taxpayers who close on qualifying homes in 2010 can choose to claim the $8,000 or $6,500 tax credit on a 2009 or 2010 tax return. Anyone who files a 2009 tax return, then subsequently purchases a qualifying home, can file an amended 2009 federal tax return to claim the $6,500 home purchase credit (instead of waiting until the 2010 personal income tax return is due).