How-To From a New Homeowner

October 22, 2009 by Fallon Brooks

Thanks to the first-time home buyer tax credit, first-timers everywhere are clamoring to get their closing date set before the November 30th deadline. As a first-time home buyer, the buying process was a big enough stressor for me, but actually filing for the credit can seem almost as confusing as understanding all those closing documents. Have no fear, It’s actually a pretty simple process and should only require about an hour of your time. You can choose to file for the tax credit on your 2009 taxes, or you can amend your 2008 taxes and get your refund a little faster, here’s how:

First, fill out form 5405.

Don’t let all the tax jargon and instructions fool you, read the instructions carefully. There’s not much clarity on what to send in with the 5405 Form, so I’ll break it down for you.

If you’re amending your 2008 return, then you’ll need to file a 1040x form with the 5405. The instructions for it are available here.

You’ll need to enter all the information from your original 1040 into all the blanks, and add the credit in at line 15C, NOT line 7.

If you’re filing it on your 2009 return, you’ll simply fill out the 5405 form and add the credit in on line 53C of the regular 1040 form. Whether you file an amended 1040x, or you file with your 2009 taxes, make sure to include a copy of your closing settlement statement or “HUD Worksheet”. There’s no specific mention of it in the instructions, but to be on the safe side, you should include it. This verifies how much you paid for the home and how much credit you’ll get in return.

When you get everything filled out, verify in the instruction form what processing center you need to mail your forms to. For Oklahoma it should be the Fresno, CA center. Remember that there are restrictions:

If you purchased your home between January 1-December 31, 2008 your credit is $7,500 and is to be paid back beginning on your 2010 taxes over a 15 year period or as long as you own the home. If you sell your home prior to the 15 year mark (which you most likely will), you must pay back the remaining balance in the year you sell the home.
If you purchased your home between January 1-November 30, 2009 then your credit will be 10% of the purchase price of the home, up to $8,000. This credit must only be paid back if you sell the home within 36 months of the closing date.

So, all that being said, have fun thinking of what to do with your tax credit! I know I’ll be putting in a new a new kitchen.

Now for the fun part; the disclaimer: Neither I, nor anyone else on this blog, are tax experts, so be sure you consult your tax adviser to verify any and all procedures and qualifications mentioned here.