IRS releases rules on $6,500 tax credit for repeat homebuyers on clarkhoward.com

The IRS has released new information for existing homeowners who bought a new home and wish to claim the $6,500 tax credit. Read the accompanying press release. The relevant form you'll need to file is Form 5405. (Editor's note: This is a pdf file.)

Be aware that you must show proof you owned and occupied your prior home for five consecutive years. In addition, if you claim the credit and flip the new house, the IRS will retroactively come after you for the $6,500. You must stay in the new home a minimum of three years, during which it must be owner-occupied as your primary residence.

The clarification of the rules surrounding this credit may provide a temporary booster shot by creating another incentive for people to buy -- just as the $8,000 first-time homebuyer credit did.

All of this begs the question of when the housing market is going to recover. The new Case-Shiller Index shows the bottom is upon us in most markets across the country. But when do we get back to where we were when home values were at their peak two or three years ago? The latest guess is 2022, according to a Los Angeles Times analysis.

That's 12 years from now. Of course, no one knows what the future holds. But Clark has said that he expects our nation could spend seven to 12 years working our way out of the funk, so that dovetails very nicely with this new info.

This does not mean seven to 12 years of daily doom and gloom. Rather, we'll have a continuing drag effect on our economy with bumps in the road -- such as unemployment and budget deficits -- for up to a dozen years.

What others are saying

6,500 tax credit
I bought a house back in '99 lived there until i sold it on march 2009. Bought a new house november 2009. do i qualify for this?
By Mike @ 03/08/10 05:51:17 AMreport abuse
6,500 Tax Credit
I bought my homeon nov.6th and i'm a previous homeowner and lived in it fo at least five years.Do i Qualify for a rebate?A local tax service said i was a day to late
By Slickkster @ 03/06/10 11:35:58 PMreport abuse
do i or don't I?
We bought our house in July 05 and we are closing on our new house on the end of March. DO WE QUALIFY OR NOT?
By thallock @ 03/05/10 01:21:10 AMreport abuse
Extension?
Any chance the government extends this credit again? I want to use it, but we need to SELL before we can BUY....
By Jeem @ 03/04/10 06:26:57 PMreport abuse
Fine print
I think its important to point out that more people may be eligible for this than they realize.
For long term residents: A long-time resident is an individual (and that individual’s spouse if married) who has owned and used the same home as that individual’s main home for any 5-consecutive-year period during the 8-year period ending on the purchase date of the new main home and meets other requirements discussed in the instructions.
That means that even though I've been living in a rental for 2 years, my previous home of 15 years qualifies me for the credit.
I'm ready to go hunting!
By Denise @ 03/01/10 05:27:13 PMreport abuse
$6,500 tax credit
I bought a home in 2000 and sold it in 2007, In 2007 I bought another home and lived in it for 2 years. Can I qualify for the 6,500?
By Jean Zancanaro @ 02/28/10 05:48:11 PMreport abuse
selling old house
If you buy a new home, do you have to sell your old home before you qualify for the $6500? Can you just have it on the market?
By sammy @ 02/22/10 09:45:20 AMreport abuse
Ripped Off
I purchased my townhouse June 06 for 327k now worth 250k. I do not qualify for a penny.
By Margo @ 02/08/10 06:45:44 PMreport abuse
IRS home tax credit
does the $6500 only apply if new home bought in 2009? (we bought in 8/07 and just re-fi'd in december)

thx in advance
By steveO @ 02/03/10 04:16:55 PMreport abuse
re:re prices
Yes they may still fall further, but like you say interest rates will do nothing but rise in the future. There are plenty of foreclosures and short sales out there that are bargains. Just because there may be more of them in the future doesnt mean there will be any cheaper deals out there. You wont get a house for $5,000 at auction tommorrow that you can get at $10000 today....there will just be more bargains for the picking. Like you said the mortguage rates are going up (have been for 6 months) so locking in that 30 fixed now on a bargain will make your payments lower than if you wait to choose from the many bargains available down the road. I agree there will be more foreclosures in the future but rising interest rates wont make them any cheaper. No i'm not a RE agent...I have a townhome I cant sell for the last 3 years because the market tanked (thankfully it's paid for) we are going to rent it until the value comes back. If i could sell it, I would buy 2 rental properties tommorrow with some of the money, the deals in GA are just too good. Anyone with good credit can buy a house here and have payments for less than what the average rent is. + they get tax credit money too! The rest of the losers with bad credit or people that were too dumb to know they couldnt afford the house they bought, can pay rent.
By Dave @ 01/27/10 07:48:30 PMreport abuse
RE prices
Hey Dave, are you a real estate agent? Only an RE agent would tell people the bottom is in for RE prices when there are plenty of signs that say otherwise. Interest rates have nowhere to go but UP, and that will zap home prices. Millions of foreclosures, residential and commercial, are about to hit the market, another negative factor for prices. Sorry to burst your Pollyannish optimism, but RE prices could easily see another 20-30% decline from where they are today.
By Joe @ 01/27/10 12:28:14 PMreport abuse
IRS Form 5405
Are the dates incorrect on the form? It shows purchasing a home between May and July of 2010, should this not be 2009?
By Andrew @ 01/27/10 11:57:59 AMreport abuse
tax credit
Another note i heard from an H&R block rep that they made a loophole on the 3 year rule for active military and their families, so they can sell/rent after 2 years without penalty.
Old guy while I admire your grumpiness with government, your way off on the affordability issue. Today is the best time to buy, with all the foreclosures and short sales, houses have lost their overinflated values. You can find true bargain basement prices out there, and since you are debt free and qualify for the tax credit...use it. Then you can't complain that you are paying for all the stimulus and getting nothing out of it. You sound like you would make a responsible homeowner, with interest rates at historic lows as well you would have the low payments and earn equity instead of throwing rent money away month after month.
By Dave @ 01/27/10 11:54:05 AMreport abuse
Real Estate industry influence
These generous taxpayer-funded tax credits prove that substantial contributions from the real estate industry to the politicians did indeed pay off.
By Steve @ 01/27/10 11:04:01 AMreport abuse
Same ol' Socialist tactics...
Obama just won't quit playing with the numbers! When will Government get the hell out of our private-sector's business? Everything the Fed's do is expensive, taxative and idiotic. The spending orgy in Washinton must end! Tax credits for homebuyers only artificially props up the RE market and rewards people for piling on even more personal debt. And who pays for this? The rest of us who are financially responsible, that's who. At 51, I have yet to purchase a home because I can't afford it, even though I'm debt free. I'm hopeful that in the next few years, prices will come out of the stratosphere so that average Americans can purchase affordable housing. In the meantime, I'm tired of watching the Feds bait everyone into this orgy of irresponsible borrowing and spending.
By Just another old guy @ 01/26/10 11:41:17 PMreport abuse
But . . .
If you married three years ago, with the husband qualifying as a first time homebuyer (no mortgage) and the wife having lived in her house for 13 years, you don't get the benefit of the tax credit. Both partners must qualify. Thank you for mucking me over, IRS.
By Doug @ 01/26/10 08:18:59 PMreport abuse
What these credits really mean
Think for a minute about what the government is actually doing with these tax credits like the cash for clunkers or the mortgage incentives. Sure the buyers get a nice, one-time tax credit, but they are also saddled with 4-30 years of additional debt! Thanks a pantload Uncle Sam.
By Alan T @ 01/26/10 06:04:07 PMreport abuse
irs release
i have lived in my house for 20 yrs do i qualify for this?
By deanna @ 01/26/10 04:42:26 PMreport abuse

6,500 tax credit

I bought a house back in '99 lived there until i sold it on march 2009. Bought a new house november 2009. do i qualify for this?

By Mike @ 03/08/10 05:51:17 AMreport abuse

6,500 Tax Credit

I bought my homeon nov.6th and i'm a previous homeowner and lived in it fo at least five years.Do i Qualify for a rebate?A local tax service said i was a day to late

By Slickkster @ 03/06/10 11:35:58 PMreport abuse

do i or don't I?

We bought our house in July 05 and we are closing on our new house on the end of March. DO WE QUALIFY OR NOT?

By thallock @ 03/05/10 01:21:10 AMreport abuse

Extension?

Any chance the government extends this credit again? I want to use it, but we need to SELL before we can BUY....

By Jeem @ 03/04/10 06:26:57 PMreport abuse

Fine print

I think its important to point out that more people may be eligible for this than they realize.
For long term residents: A long-time resident is an individual (and that individual’s spouse if married) who has owned and used the same home as that individual’s main home for any 5-consecutive-year period during the 8-year period ending on the purchase date of the new main home and meets other requirements discussed in the instructions.
That means that even though I've been living in a rental for 2 years, my previous home of 15 years qualifies me for the credit.
I'm ready to go hunting!

By Denise @ 03/01/10 05:27:13 PMreport abuse

$6,500 tax credit

I bought a home in 2000 and sold it in 2007, In 2007 I bought another home and lived in it for 2 years. Can I qualify for the 6,500?

By Jean Zancanaro @ 02/28/10 05:48:11 PMreport abuse

selling old house

If you buy a new home, do you have to sell your old home before you qualify for the $6500? Can you just have it on the market?

By sammy @ 02/22/10 09:45:20 AMreport abuse

Ripped Off

I purchased my townhouse June 06 for 327k now worth 250k. I do not qualify for a penny.

By Margo @ 02/08/10 06:45:44 PMreport abuse

IRS home tax credit

does the $6500 only apply if new home bought in 2009? (we bought in 8/07 and just re-fi'd in december)

thx in advance

By steveO @ 02/03/10 04:16:55 PMreport abuse

re:re prices

Yes they may still fall further, but like you say interest rates will do nothing but rise in the future. There are plenty of foreclosures and short sales out there that are bargains. Just because there may be more of them in the future doesnt mean there will be any cheaper deals out there. You wont get a house for $5,000 at auction tommorrow that you can get at $10000 today....there will just be more bargains for the picking. Like you said the mortguage rates are going up (have been for 6 months) so locking in that 30 fixed now on a bargain will make your payments lower than if you wait to choose from the many bargains available down the road. I agree there will be more foreclosures in the future but rising interest rates wont make them any cheaper. No i'm not a RE agent...I have a townhome I cant sell for the last 3 years because the market tanked (thankfully it's paid for) we are going to rent it until the value comes back. If i could sell it, I would buy 2 rental properties tommorrow with some of the money, the deals in GA are just too good. Anyone with good credit can buy a house here and have payments for less than what the average rent is. + they get tax credit money too! The rest of the losers with bad credit or people that were too dumb to know they couldnt afford the house they bought, can pay rent.

By Dave @ 01/27/10 07:48:30 PMreport abuse

RE prices

Hey Dave, are you a real estate agent? Only an RE agent would tell people the bottom is in for RE prices when there are plenty of signs that say otherwise. Interest rates have nowhere to go but UP, and that will zap home prices. Millions of foreclosures, residential and commercial, are about to hit the market, another negative factor for prices. Sorry to burst your Pollyannish optimism, but RE prices could easily see another 20-30% decline from where they are today.

By Joe @ 01/27/10 12:28:14 PMreport abuse

IRS Form 5405

Are the dates incorrect on the form? It shows purchasing a home between May and July of 2010, should this not be 2009?

By Andrew @ 01/27/10 11:57:59 AMreport abuse

tax credit

Another note i heard from an H&R block rep that they made a loophole on the 3 year rule for active military and their families, so they can sell/rent after 2 years without penalty.
Old guy while I admire your grumpiness with government, your way off on the affordability issue. Today is the best time to buy, with all the foreclosures and short sales, houses have lost their overinflated values. You can find true bargain basement prices out there, and since you are debt free and qualify for the tax credit...use it. Then you can't complain that you are paying for all the stimulus and getting nothing out of it. You sound like you would make a responsible homeowner, with interest rates at historic lows as well you would have the low payments and earn equity instead of throwing rent money away month after month.

By Dave @ 01/27/10 11:54:05 AMreport abuse

Real Estate industry influence

These generous taxpayer-funded tax credits prove that substantial contributions from the real estate industry to the politicians did indeed pay off.

By Steve @ 01/27/10 11:04:01 AMreport abuse

Same ol' Socialist tactics...

Obama just won't quit playing with the numbers! When will Government get the hell out of our private-sector's business? Everything the Fed's do is expensive, taxative and idiotic. The spending orgy in Washinton must end! Tax credits for homebuyers only artificially props up the RE market and rewards people for piling on even more personal debt. And who pays for this? The rest of us who are financially responsible, that's who. At 51, I have yet to purchase a home because I can't afford it, even though I'm debt free. I'm hopeful that in the next few years, prices will come out of the stratosphere so that average Americans can purchase affordable housing. In the meantime, I'm tired of watching the Feds bait everyone into this orgy of irresponsible borrowing and spending.

By Just another old guy @ 01/26/10 11:41:17 PMreport abuse

But . . .

If you married three years ago, with the husband qualifying as a first time homebuyer (no mortgage) and the wife having lived in her house for 13 years, you don't get the benefit of the tax credit. Both partners must qualify. Thank you for mucking me over, IRS.

By Doug @ 01/26/10 08:18:59 PMreport abuse

What these credits really mean

Think for a minute about what the government is actually doing with these tax credits like the cash for clunkers or the mortgage incentives. Sure the buyers get a nice, one-time tax credit, but they are also saddled with 4-30 years of additional debt! Thanks a pantload Uncle Sam.

By Alan T @ 01/26/10 06:04:07 PMreport abuse

irs release

i have lived in my house for 20 yrs do i qualify for this?

By deanna @ 01/26/10 04:42:26 PMreport abuse

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Jan 26, 2010 -- IRS releases rules on $6,500 tax credit for repeat homebuyers

What others are saying