Tax credit program has rules, limits

If you bought a house recently, you can take advantage of the federal government's tax credit programs. It could mean money in your pocket.

First you have to make sure you qualify. Internal Revenue Service rules are so confusing even real estate professionals have a hard time keeping them straight.

We asked IRS spokesman Michael Dobzinski to summarize the process:

• The purchase must be on your primary residence. This is the house where you spend "most" of your time, as defined by the IRS.

• One of the credits is for first-time buyers and those who have not owned a home in the past three years. The maximum credit is $8,000. It applies to purchases made between Jan. 1, 2009, and April 30. The deal must close by June 30.

• In November, the government expanded the credit beyond first-time buyers. This new credit, worth up to $6,500, is for buyers who have owned a primary residence for at least five consecutive years out of the past eight years. The new purchase must be made between Nov. 7 and April 30 with a closing by June 30.

• If you bought in 2010, you can claim the credit on your 2009 tax return as long as the contract for the home was purchased before the April 30 deadline and as long as the deal closes by June 30.

• In order to claim the credit, taxpayers must file by paper. Buyers can use electronic forms to assist in filing but must print them out and mail them in, along with form 5405, which can be found on the IRS Web site.

•Taxpayers must prove they are eligible for the credit. For the first-time buyer's credit, a closing statement from the Department of Housing and Urban Development must be submitted with the tax form. For the longtime-owner credit, send proof such as copies of mortgage-interest statements, property tax records or homeowner's insurance records.

• There are income and price requirements if the home was purchased after Nov. 6: It can cost no more than $800,000; individuals cannot earn more than $125,000; and married couples filing jointly cannot earn more than $225,000.