The Treasury Inspector General for Tax Administration, after reviewing about 57 million tax returns said that on returns it received by March 6 over 565,000 returns claimed the credit, with just over 38,000 declared ineligible because the taxpayers had owned a home in the last three years. At that pace the total number of taxpayers claiming the credit will pass 1.3 million with just under 95,000 declared ineligible.
Under the program, eligible taxpayers must not have owned a principle residence within the last three years; there are also limits in place concerning income. Homebuyers may claim the credit on either of their 2008 or 2009 tax returns, so many will wait until next year. The credit allows for 10% of the home's purchase price up to $8,000. The Treasury Inspector General says it has had difficulty processing the returns of those claiming the credit because of the bolstering of the program in 2009. First-time buyers who purchased a home between April 8 and Dec. 31 of 2008 can also take advantage, though for them the cap is $7,500 and the money must be repaid, interest free, over 15 years.
The American Recovery and Reinvestment Act changed the credit from a loan to a rebate (provided the taxpayer owns the home for 3 years) and raised the amount to $8,000. The Treasury Inspector General said that it's existing software was programmed to reject Form 5405 claims that exceeded $7,500, so it has had to reprogram the software so that it recognizes the date of purchase on electronically filed returns, and has had to manually review written returns. Legislators earmarked just over $13.5 billion for
the program in hopes that 2 million taxpayers would use the credit, thus bringing stability to the turbulent real estate market.
There is no plan in place to end the program early if the intended cap is reached. A similar program in the state of California earmarks $100 million, of which a third has already been claimed only 45 days in. The California credit offers $10,000 to first-time buyers who purchase before March 1, 2010. Participants must purchase a new home and the credit will be closed once $100 million is awarded. The state is processing applications on a first-come, first-served basis.
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