It is starting to become very unclear to those of us within the industry whether the Obama administration is going to provide another extension to the home buyer tax credit that was initiated back in 2009. As a quick summary, The Worker, Homeownership, and Business Assistance Act of 2009 (“Act”) was the manner by which the federal government provided a tax credit to qualified first-time home buyers of up to $8,000.00 (depending upon the purchase price of the home). However, late in 2009, the provisions of the Act were modified to include a provision that allowed for a similar credit to be given to “repeat” home buyers of up to $6,500.00 (again, depending upon the purchase price of the new home). Both of these credits are subject to the individual’s qualification as an eligible participant (using elements such as their relative income level, or, in the case of a repeat home buyer, how long they have owned their previous home), but they have certainly made home buying a lot easier during these difficult economic times.
Unfortunately, this great program will probably be coming to an end soon. There have been some movements in various subcommittees within Congress to see what could be done to either extend these credits for an additional period of time or to modify the programs in one form or another, but the remainder of this article shall presume that Congress will take neither of these actions. Therefore, in order to take advantage of either of these credits in their current form, the most important facet right now is to make sure that you have a binding sales contract in place no later than April 30, 2010, regardless of which credit for which you might qualify. Now that does not mean that you need to complete the purchase by then … it simply means that you must have a valid contract to buy your home completely executed by then. Once you have met this first deadline, then you must complete the purchase closing for the property no later than June 30, 2010. If both of these deadlines are met, and if you meet the other requirements as set forth in the Act, you will qualify for your tax credit. But make no mistake … these deadlines are FIRM. If you complete either of these tasks literally minutes after the deadline, the credit will not be available to you.
Beyond these timelines, we here at the Rounsavall Title Group have discovered that there is another element to the Act of which many people are simply unaware, and that is how the Act has implemented special rules for active members of the military. Within the Act, Congress expressly acknowledged that there are many unique and special circumstances that affect qualified service members of our nation’s military, the U.S. foreign service or the U.S. intelligence community, and as such, the Act makes various exceptions for these individuals that would apply to either of the aforementioned tax credits:
1. Exemption from tax credit recapture rules: Typically, one of the lesser-known provisions of the Act states that homes that are either sold outright or cease to be used as a home buyer’s principal residence within three (3) years of the initial purchase are subject to recapture of the tax credit (if the home buyer elected to receive – and did receive – the applicable tax credit). However, certain members of these fields listed above who sell or move from a tax credit home within that same three (3) year period from the initial purchase due to official extended duty are exempt from the recapture rule.
2. Extension of tax credit deadlines. As stated earlier, the home buyer tax credit is available for qualified purchases with a binding sales contract in place on or before April 30, 2010 and closed by June 30, 2010. However, for certain members of these fields who are ordered on a period of official extended duty – which means any period of extended duty outside of the United States for at least ninety (90) days during the time period between December 31, 2008 and May 1, 2010 – these timelines are extended for one (1) additional calendar year, which means that for these home buyers, the tax credit is available to these individuals as long as they have a binding sales contract in place on or before April 30, 2011, and the transaction is closed no later than June 30, 2011.
If you have any questions or concerns regarding the Act itself and how it will work during the next couple of months, please feel free to give us a call or make an appointment with us so that we can discuss it further with you. Also, should you like to see us prepare an article on a particular field of real estate that we have yet to address, please feel free to e-mail us at the link provided on our home page … we welcome your requests!
