John Mezzanotte, Tax & Business Partner, Quoted in New Haven Register Article – Homestretch: Now's the time many must claim 2010 homebuyer credit

Excerpt:

Tax credits available to first-time and repeat homebuyers spurred many across the country to purchase houses early last year, giving the otherwise sluggish housing market a temporary boost, and financial experts are reminding taxpayers that this is the time many should be claiming the credit when filing 2010 returns.

This likely is taxpayers’ last opportunity to take advantage of the credit if they bought a home early last year, according to the Connecticut Society of Certified Public Accountants.

“There’s a lot to this credit,” said John Mezzanotte, partner at accounting firm Marcum LLP in New Haven, adding there are various aspects of which to be aware — including that it is a refundable credit.

Though commonly referred to as the “first-time homebuyer tax credit,” there actually is a credit available to first-time buyers — defined as those who have not bought a primary residence in the past three years — as well as one for repeat buyers.

The credit for eligible first-time buyers is for up to 10 percent of a home’s purchase price, up to a maximum of $8,000. It applies to home sales that occurred between Jan. 1, 2009 and April 30, 2010. In cases where a binding sales contract was signed by April 30, 2010, buyers had until Sept. 30, 2010, to close the deal.

There also is a credit of up to $6,500 available to qualified repeat buyers. To qualify, they had to have owned and lived in their previous homes for five consecutive years out of the last eight years. The credit is equal to 10 percent of their new home’s purchase price, up to a maximum of $6,500.

The repeat buyer credit is available to qualifying purchases made between Nov. 6, 2009 and April 30, 2010. Those who had a binding sales contract in place by April 30, 2010, had until Sept. 30 to complete the deal.

According to the CPA society, the credits are no longer available to most people. Qualifying service members in the military, however, are able to use the credit for homes they buy by July 1 of this year.

Those claiming the credit as part of their 2010 tax filing need to fill out Internal Revenue Service Form 5405, regardless of whether they are claiming the first-time or repeat homebuyer credit, said Mezzanotte. The second section of the form will ask taxpayers to denote whether they are first-time or repeat purchasers.

Instructions for filling out the form can be found on the IRS website at www.IRS.gov.

Having certain documents handy when filling out Form 5405 will make it easier, Mezzanotte said. Taxpayers will need to know certain dates related to their purchase, so they should have a copy of the settlement agreement or purchase contract on hand.

Also, they will need to know their modified adjusted gross income, so should already have prepared their income tax returns. “These things are going to be very helpful,” he said.

Not all types of homes qualify. Eligible homes can not cost more than $800,000, they must be located in the United States, and vacation and rental properties do not qualify. Additionally, homes that are bought from a relative of the buyer are ineligible, Mezzanotte said.

Another aspect to note, according to the society, is that there are income limits taxpayers must meet in order to claim the credit.

For those who bought a home in 2010, the full credit is available to married couples filing jointly with a modified adjusted gross income of up to $225,000, according to the CPA society. The credit gradually phases out for those who earn incomes of up to $245,000.

For other filers, the full credit is available to those with modified adjusted gross income of up to $125,000. It is then phases out for those earning incomes of up to $145,000.

Though there are income limits, there are no minimum income requirements for the credits. Those who typically do not file a tax return may still be eligible for the credit.