November 2nd, 2009 by Michael Oliver

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Share on Facebook The first time homebuyer tax credit extension is getting close to being completed. Here is the latest on what should be a part of the final package for homebuyers;

— The tax credit would be $8,000 for first-time home buyers and $6,500 for move-up buyers (from December 1, 2009 to April 30, 2010).

— Move-up buyers will be eligible, so long as the home they are leaving has been used as their principal residence for 5 years or more.

— The tax credit would sunset on April 30, 2010. However, there would a binding contract rule that will permit those with contracts as of April 30th to qualify for the credit so long as they complete the transaction within 60 days.

— The income limits for both first-time home buyers and move-up buyers would be $125,000 for single return and $225,000 joint return.

— Cost of the home may not exceed $800,000 to be eligible.

— For purchases made in 2010, taxpayers would be able to claim the credit on their 2009 income tax return.

— Home buyers would not have to repay the credit, provided the home remains their principal residence for 36 months after the purchase date.

— The amendment includes a military waiver provision, meaning the recapture provision would not apply in the case of a member of the Armed Forces, military intelligence or Foreign Service who is on qualified official extended duty. In addition, members of the military who have been deployed overseas for 90 days or more in 2008 or 2009 would have until April 30, 2011, to claim the home buyer tax credit.

— The amendment also includes anti-fraud language that provides math authority to the IRS to do greater oversight during the processing of the return rather than waiting for an audit situation. The amendment requires the taxpayer claiming the credit to be 18 or older as well as requiring a HUD-1 settlement statement to be attached when claiming the credit.

These improvements on the first time tax buyer credit should spur the real estate markets even more than last year’s tax credit which is still set to expire on Nov 30^th, 2009. One interesting add-on is the benefit for $6,500 for “move-up” buyers. (Those buyers moving up to a bigger or new home from their current one.) That incentive should really help get the market more fluid in the price ranges above the first time buyer marketplace. The only problem I see with that is a move-up buyer in most situations will need to sell their home first, and then buy a new one all before April 30^th. That’s very fast, but if sellers are serious about selling should be able to make their home sale happen and close on a new home in that timeframe.

Let me know what you think about these new provisions being worked into the first time buyer extension bill, is this good, bad, will it help? To post a comment type in the comment below in the box and then submit it.

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