Claiming Your Homebuyer Tax Credit - Long Process

Taxpayers taking advantage of the $8,000 first time home buyer credit or the new $6,500 home purchase credit for existing homeowners have been waiting for the IRS to post an updated home purchase credit form on its website for months. Now that the IRS has posted the revised Form 5405 on irs.gov, eligible taxpayers can now start claiming their home buyer tax credits.

Revised Form 5405 & Proof Needed for Federal Tax Credit
Anyone who wishes to claim a federal tax credit for home purchase should first fill out Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. Then, they should attach one or more documents as proof of a qualifying purchase.

Documentation Needed for First-Time Home Buyers
First-time home buyers must provide the IRS with proof of purchase. The IRS indicates that one of the following documents must be attached in order for a federal tax credit for home purchase to be processed correctly:

•Copy of Form HUD-1 (Settlement Statement) or similar document that shows all parties’ names and signatures, the property address, sales price, and date of purchase.
•Copy of the executed retail sales contract (in case of mobile home purchases) that shows the same information.
•Copy of the dated certificate of occupancy (in case of new construction) that shows the owner’s name and property address.
Additional Proof Required for Existing Homeowners
The Worker, Homeownership, and Business Assistance Act of 2009 (H.R. 3548) not only expanded the first-time homebuyer tax credit, but also opened up a new $6,500 tax credit for existing homeowners.

Existing homeowners are eligible for a $6,500 tax credit if they have lived in their old house for five consecutive years out of an eight-year period ending on the purchase date of the new house. In addition to the documentation requirement above, taxpayers who fall into this category must also provide proof of the five-year residence with mortgage interest statements, property tax records, or homeowner’s insurance documents.


Important: Anyone who wishes to claim a first-time or existing home buyer tax credit must file paper returns because certain paper documents must be attached to the returns as proof of purchase.

New Home Buyer Tax Credit – Downloading 2009 Form 5405 Instructions
Unlike previous versions of the document, the instructions for revised Form 5405 come in a standalone PDF document. Revised Form 5405 (otherwise known as the “2009 version,” or “2009 Form 5405”) is available separately.

Here are direct links to revised Form 5405 and its instructions:

Revised IRS Form 5405 (2009 version)

Instructions for Revised IRS Form 5405

Obama Tax Stimulus – $6,500 & $8,000 Home Buyer Tax Credit Form
Currently, the old version of Form 5405 is no longer available on the IRS website. The 2009 version of Form 5405 should be used to claim tax credits for house purchases made in 2009 or 2010 (filed with original or amended 2008 or 2009 tax returns).

Assuming no changes are made to the form between now and the next filing season, this same form may also be required for home buyer tax credits claimed on 2010 tax returns.

New Form for $8,000 & $6,500 Tax Credits – Processing Delays
In a January 15, 2010 announcement (IR-2010-006), the IRS indicated that tax returns with attached Forms 5405 would be processed beginning sometime in mid-February 2010. The IRS mentioned a need to first test its systems for compliance with new tax laws and make sure important fraud detection systems were in place before any home buyer tax credit forms are processed. Anyone who files their return with attached Form 5405 and proof needed for the federal tax credit should expect any anticipated refund to be delayed while the IRS double-checks its systems.