What you should know about the Tax Credit Extension

    We’re still waiting on Obama to sign this into law, but it’s anticipated that he will sometime Friday 11/6/2009.

    **UPDATE: Obama Signed the bill into law 11/6/2009**

    Read the Full Bill Here.

    At long last – I can’t even tell you how many calls I’ve gotten about this the last week-and-a-half.  Most of them were false information from false claims that the bill had been passed when in fact it had only been voted and passed by a portion of those entities needed to make the bill a law, now the fate of the law rests on Obama’s shoulders.

    Long story short, here’s the down and dirty (simply my interpretations only, please verify with a competent Tax Accountant or Tax Attorney – I’m happy to give you a referral).

    ‘(2) EXCEPTION IN CASE OF BINDING CONTRACT- In the case of any taxpayer who enters into a written binding contract before May 1, 2010, to close on the purchase of a principal residence before July 1, 2010, paragraph (1) shall be applied by substituting ‘July 1, 2010’ for ‘May 1, 2010’.’.

    What I think: The current Home buyer Tax Credit expires sharply for properties not purchased AND closed prior to 12/1/2009 – which means on 11/30/2009.  The new modifications allow for buyers to have a little leeway to write offers UP UNTIL 05/01/2010 and close before 7/1/2010 – which will give a longer lasting effect to the credit which virtually died once we all realized we couldn’t close any more deals prior to 11/30/2009.

    ‘(6) EXCEPTION FOR LONG-TIME RESIDENTS OF SAME PRINCIPAL RESIDENCE- In the case of an individual (and, if married, such individual’s spouse) who has owned and used the same residence as such individual’s principal residence for any 5-consecutive-year period during the 8-year period ending on the date of the purchase of a subsequent principal residence, such individual shall be treated as a first-time home buyer for purposes of this section with respect to the purchase of such subsequent residence.’.
    ‘(D) SPECIAL RULE FOR LONG-TIME RESIDENTS OF SAME PRINCIPAL RESIDENCE- In the case of a taxpayer to whom a credit under subsection (a) is allowed by reason of subsection (c)(6), subparagraphs (A), (B), and (C) shall be applied by substituting ‘$6,500’ for ‘$8,000’ and ‘$3,250’ for ‘$4,000’.’.
    What I think:Owners having used a principal residence for 5 out of the past 8 years (consecutively) may qualify as a first time buyer for lesser amounts ($3,250 – $6,500).
    Other modifications include:
    • Single income limitations raised from $75,000 to $125,000
    • Married income limitations raised from $150,000 to $225,000
    • A minimum age limit of 18 years of age, unless married.
    • The bill also includes provisions to extend unemployment up to 13 weeks (among other unemployment benefits)
    • Also included is allowing businesses to carry back losses up to 5 years for losses incurred in 2008 & 2009.
    • Extension for home buyer tax credit for qualified military, intelligence and government operatives overseas until 2011.
    • Increase in some fines for filing S-Corp and Partnership tax returns up to $195.

    I’m not an accountant or attorney, the intended information is merely an opinion.  You are strongly encouraged to consult an attorney or tax professional for any and all tax incentive issues.  I’m happy to provide great referrals!

    More Commentary:
    The Phoenix Real Estate Guy’s take.
    8,000 Tax Credit Information

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