Time is running out to become eligible to claim the first-time homebuyer credit. In November 2009, the third phase of the first-time homebuyer credit began. It extended the deadline for purchasing and closing on a home, authorized the credit for long-time homeowners buying a replacement principal residence, and raised the income limitations for homeowners claiming the credit. Other aspects of the credit remain the same. The credit is 10 percent of the purchase price of the home, with a maximum available credit of $8,000, for first time homebuyers. A principal residence could not have been owned by the first time homebuyer for three years prior to the date of purchase. Any home purchased for a principal residence and located in the United States qualifies.

To be eligible in 2010 for the credit, the purchaser must enter into a binding contract to buy the home by April 30, 2010 and close the purchase by June 30, 2010. If the home is constructed, the purchase date is considered to be the date you first occupy the home.

After November 6, 2009, long time homeowners can qualify, if buying a replacement principal residence. The purchaser much have owned and used the same home as their principal residence for at least five consecutive years of the eight-year period ending on the date the new residence is purchased.

Also, in 2010, the income phase out range of the credit was increased. The phase out was increased to $225,000 to $245,000 for married filing joint taxpayers and $125,000 to $145,000 for all other taxpayers.

With the added legislation, more paperwork is required to properly process the return for a purchase in 2009 and 2010. If you claim the credit on a 2009 or 2010 return, a copy of your settlement statement must be attached to your paper filed return. For most taxpayers, this would be a properly executed Form HUD-1, Settlement Statement. This statement includes the names and signatures of all parties involved, property address, purchase price, and date of purchase. For a mobile home with no settlement statement, attach a copy of the executed retail sales contract showing all parties’ names and signatures, the property address, the purchase price and the date of purchase. For a newly constructed home, attach a copy of the certificate of occupancy showing the name of the taxpayer, the property address, and the date of the certificate. In addition, if you purchase a home after April 30, 2010, you should attach a copy of the pages from a signed binding contract to make a purchase showing all parties’ names and signatures, the property address, the purchase price and the date of the contract.

For long time residents purchasing a replacement home, submitting proper documentation with your return can prevent refund delays. Attach documentation covering the five-consecutive year period such as Forms 1098, Mortgage Interest Statement, property tax records, or homeowner’s insurance records. Any combination of these documents to help verify that you owned and lived in your principal residence for at least five consecutive years is acceptable.

With the added documentation, the tax return must be paper filed. The Internal Revenue Service estimates that it will take four to eight weeks to process a complete and accurate paper return where all required documents are attached. Prior filed returns have been hung up in processing for poor documentation for much longer than this estimate. Therefore, it is wise to send proper documentation for this credit.

For once in your life, something that is too good to be true actually is real. Don’t miss your chance to take advantage of the first time homebuyer credit.

Anka Cannon is a CPA at Silas Simmons, LLP. She can be reached at 442-7411