Depending on your state of residence, you may qualify for a tax credit, which can reduce your household's tax burden. In states such as Ohio, you can reduce your tax burden every year for the life of your mortgage loan, whereas in states such as California, you can reduce your tax burden for a successive period of time, which as of 2011 is three years. Federal tax breaks are also available. Apply for a new home or first-time buyer tax credit on your state and federal income taxes.
Apply for a new home or first-time buyer tax credit. Visit your state's Franchise Tax Board to download an application for either program. Check the required delivery method, which may be fax or certified mail.
Check eligibility requirements. Tax credits are only available for taxpayers who purchase a qualified principal residence on or after the program's cutoff date. Application deadlines apply. FTB may receive enough applications to allocate the allowable budget for tax credits before the program's cut-off date. Check your state's FTB website for updates.
Return one completed application per residence. Include the name of all qualified buyers on the application.
Check the maximum allowance for the tax credit. For example, in California, new home and first-time buyer tax credits are limited to the lesser of 5 percent of the purchase price or $10,000 for a qualified principal residence.
Complete your tax documents. Apply the total tax credit for the tax year in which your home was purchased. Do not exceed the maximum amount allowed for the year. Most states do not allow you to carry over tax credits.
Claim the maximum tax credit allowed on your federal tax return. Check eligibility on the IRS website. As of January 2011, "You must have bought — or entered into a binding contract to buy — a principal residence on or before April 30, 2010," according to the IRS website.
Download and fill out Form 5405, which is titled, "First-Time Homebuyer Credit and Repayment of the Credit."
Attach a properly executed copy of the settlement statement used to complete the purchase of your home. The settlement statement should contain all parties' names, property address, sales price and date of purchase. The IRS considers a settlement statement properly executed if it is complete and valid according to local law.
Download and fill out Form HUD-1, which is the form required for completion when purchasing a conventional home, such as a house.
File your documents with the IRS. Visit the IRS website for a state-by-state directory of where to send completed federal tax returns.
Your purchase date is the date escrow closes.