How to Claim the New Home Tax Credit

If you benefited from the U.S. Homebuyers Tax Credit in 2009, and now want to apply it to your tax forms prior to April 15, here’s a handy step-by-step guide in doing so — easily and accurately.

While hard numbers aren’t available, the new homebuyer tax credit certainly is having a significant impact on the troubled U.S. housing market in early 2010. Stan Humphries, chief economist at Zillow.com, wrote recently that the credit translates into good news for sellers, buyers and even lenders.

• Because of the extension to existing homeowners and the doubling of the salary limits for applicants, the new tax credits represent a substantial increase in the pool of eligible buyers, thus translating into more demand for housing.
• This increased demand due to the tax credits will soak up some of the foreclosures expected to flood the market in 2010. We still expect foreclosures to increase over the coming months before peaking (later in 2010), bringing more cheap inventory into the market.
• The spur in demand comes during the real estate market’s slow winter season, so it might even help out seasonal declines in home sales, which were expected to translate into downward price pressure. Spring and summer 2009 proved good for home values, as they flattened substantially.

The primary takeaway from homebuyers who qualify for the tax credit is this: it is a tax credit and not a tax deduction. In other words, if you complete your taxes and you are due for a $1,000 tax refund and an $8,000 homebuyer tax credit, you’ll get a $9,000 refund. Also, you don’t have to repay the tax credit, unless you sell your home within three years of the purchase date.

To qualify for the tax credit, you need a binding home purchase contract by April 30 — but you do have until June 30. If you’re a current member of the military, the government is grating you an additional year to claim the tax credit, to June 30, 2011.