Early in 2010, President Obama signed off on the bill that extended the $8,000 new homebuyer tax credit which was set to last until April 30, 2010. The extension meant more homebuyers had the opportunity to be under contract by the new April date to receive a sizable tax credit. The tax credit was very popular. In fact, the future of other extensions may have been derailed because so many people took advantage of the existing tax credit extensions. Now people want to know if it will be coming back.
What Is the Homebuyer Tax Credit?
Homebuyers who had a contract in place by April 30th with a closing date no later than June 30th were eligible to claim the $8,000 tax credit provided they had a modified adjusted gross income of up to $125,000 for single or $250,000 for couples. These income amounts were increased from the original rules of the tax credit.
The Obama administration originally extended the tax credit in November 2009. At that time, existing homeowners were included in the credit guidelines. Homeowners who were selling their homes could qualify for a tax credit of $6,500. Homes that cost more than $800,000 were not eligible for the tax credit. All claimants must be over the age of 18.
What Happened to the Tax Credit?
After the April 2010 extension deadline, many were hopeful that another extension would be issued to help new homebuyers. However, once the deadline had passed it became apparent no new extension was forthcoming.
One reason is because the housing market has begun to bounce back. Home purchases began surging in light of the tax credit and low mortgage rates. Sales exceeded what even the most seasoned analysts anticipated. Home prices have also gone up. In Match, the median price of a new home in the US rose 4.3%.
Another reason an extension wasn’t added was due to the government’s preoccupation with other issues, specifically the state of the government’s debt situation, foreclosures, and health care. Economists feel that the homebuyer tax credit and its subsequent extensions have done their job and brought the housing market back.
Will There Be More Time?
At this point, it doesn’t seem as if a homebuyer tax credit extension is on the horizon. However, while the original deadline has passed there are still some groups that remain eligible for the extension through 2011. These groups include active members of the Armed Forces and certain federal employees who are currently working outside of the US. These groups have another year to purchase a primary residence to qualify for the tax credit. They face deadlines of April 30, 2011 for entering into a sales contract with settlement of the purchase to be completed by June 30, 2011.
How to Claim the Credit If You’ve Met the Deadlines
Taxpayers have the option of claiming the credit on either their 2009 or 2010 income taxes. If you missed filing the credit for last year, you will need to get prepared to claim in for this year. Taxpayers must complete Form 5405, First Time Homebuyer Credit. Along with the completed form, the following documents must also be included to redeem proper credit:
Settlement Statement – a copy of the statement that shows the buyer/seller names and signatures, address of the property, sales price, and the purchase price.
Retail Contract – for mobile home purchases, a copy of the executed retail sales contract showing the property information, proper signatures, and purchase price and date is a suitable replacement for the Settlement Statement.
Certificate of Occupancy – for those with a newly constructed home purchase, a copy of the certificate of occupancy that shows the name of the owner, the address of the property, and the date of the certificate can be used in place of the Settlement Statement.