How to Apply for a Tax Credit to a Purchase Home
- 1). Determine whether you are eligible for the credit. To be considered a new homebuyer, neither you nor your spouse can have owned a home for three years before the purchase of your new home. The home must be in the United States and have been purchased between April 8, 2008 and April 30, 2010. In addition, your modified adjusted gross income must be below $145,000 for singles and married people who file separate returns and $245,000 for married couples who file joint returns. Also, the price of your new home cannot exceed $800,000.
- 2). Complete part I of Form 5405 with the necessary information about your new home, including the address and date you acquired the home.
- 3). Enter the smaller of 10 percent of the price of your home or $8,000 in line 1. For example, if your home cost $200,000, you would enter $8,000. However, if your house was $40,000, you would enter $4,000.
- 4). Determine if you need to reduce your credit because of your modified adjusted gross income. If your modified adjusted gross income is between $225,000 and $245,000 for married couples or between $125,000 and $145,000 for singles or married couples filing jointly, you need to reduce your credit. If your income is below this ranges, skip to Step 7.
- 5). Calculate your reduced credit by subtracting $225,000 for married couples or $125,000 for single filers from your modified adjusted gross income, divide the result by 20,000 and round the result to three decimal places. or example, if you are a single filer and your modified adjusted gross income was $130,000, you would get 0.250.
- 6). Multiply the result from Step 5 by your amount from Step 3 and subtract the result from the amount in Step 5 to determine the amount of your credit. For example, if you were eligible for an $8,000 credit, you would multiply it by 0.250, get $2,000, and subtract $2,000 from the $8,000 to find your reduced credit would be $6,000.
- 7). Write the value of your credit on Line 6 of the Form 5405 and copy the amount to Line 69 of your 1040 tax return.
Source...