IRS Tax Tip “Seven Important Facts About the First-time Homebuyer Credit” (No. 2010-27), dated February 9, 2010, reminds taxpayers of key factors in claiming the credit. Both first-time homebuyers and long-time residents purchasing a new home may be eligible for the credit it they bought a home in 2009 or early 2010.

The key points regarding the credit that the IRS is emphasizing are summarized below:

1. The home must be a principal resident in the U.S. purchased on or before April 30, 2010. Entering into a binding contract to purchase a home also qualifies for the credit provided the closing takes place on or before June 30, 2010.

2. The IRS defines a “first-time homebuyer” as a taxpayer or both taxpayer and spouse, if married, cannot have separately or jointly owned another principal residence within a three year period preceding the date of the purchase for which the credit is being claimed.

3. The IRS defines a “long-time resident” as a taxpayer or both taxpayer and spouse, if married, “must have lived in the same principal residence” for a consecutive five-year period during the eight years preceding the date of the purchase for which the credit is being claimed. In addition, the closing date on the new purchase must be after November 6, 2009.

4. The maximum “First-time Homebuyer Credit” for a first-time homebuyer is $8,000, while long-time residents receive a maximum credit of $6,500.

5. Taxpayers claiming the “First-time Homebuyer Credit” must file a paper federal tax return and attach the “First-Time Homebuyer Credit and Repayment of the Credit” (Form 5405) with additional documents confirming the home purchase. This credit cannot be claimed if the taxpayer files their tax return electronically due to the documentation requirements.

6. Taxpayers purchasing new homes must file, with their tax return, a copy of a properly executed “Settlement Statement” typically provided in completing a home purchase. If the taxpayer purchased a newly constructed home, they must submit a copy of the “Certificate of Occupancy,” as Settlement Statements are not available in these transactions. Those taxpayers who purchased mobile homes should submit a copy of the “Retail Sales Contract,” if a “Settlement Statement” is not available.

7. Long-time residents claiming the “First-Time Homebuyer Credit” should attach documentation confirming their five-year consecutive residence period, as required. Property tax records, homeowner’s insurance receipts, “Mortgage Interest Statements” (Form 1098) or other similar documents should satisfy the verification requirement.

Additional information can be found in “Your Federal Income Tax for Individuals” (IRS Publication 17), in the “Housing and Economic Recovery Act of 2008” and the “First-Time Homebuyer Credit Information Center” on the IRS website. Taxpayers should also consult with CPAs, professional tax preparers or other tax practitioners for advice concerning their specific tax situation.

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