- 1). Check that you qualify. You must be a first-time buyer. For the purposes of the credit this means you must not have owned a principle residence during the three-year period before the purchase. There is also an income limit. Single taxpayers must earn below $125,000 to qualify for the full credit--the limit for married taxpayers is $225,000. Above these limits, the tax credit is phased out.
- 2). Buy a home for a purchase price not more than $800,000 that will be used as your principle residence. The home may be a single-family, condo or mobile home. It cannot be purchased from another family member, however.
- 3). Complete IRS Form 5405 to determine your tax credit amount. This must be done after the purchase is completed.
- 4). Attach a copy of your HUD-1 settlement form from your closing statement to Form 5405. This acts as proof of the completed home purchase. If you are buying a newly built home, where there is no HUD-1 form, attach a copy of the certificate of occupancy. If a mobile home, include a copy of the executed retail sales contract.
- 5). Claim the tax credit on your federal income tax return, including the paperwork from Step 4. You must complete a paper return to claim the credit -- you cannot file electronically because of the extra forms. For qualifying purchases in 2010, you may claim the credit on either your 2009 or 2010 return.
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