This new-revamped tax credit free money thing the gov’t is providing

Yes the government extended the tax credit, expanded it and is offering a tax credit to home buyers who previously couldn’t qualify before.  But because it’s the government and they like to write thousands of pages of legislation to make things confusing here’s a few things you need to know.

1. The deadline is now extended until April 2010 for principle home purchases. But if the home is under contract in April 2010, you have until the end of June 2010 to close.  Here’s a hint…don’t put a contract on a short sale beginning in January 2010 if you want to close by June 2010.
    
2. I love this next one because trying to explain it, and explain it well, is like teaching me differential equations…it is impossible.  Ok here it goes.  The new existing-homeowner credit is only available for purchases that close after Nov. 6, 2009.  If you’ve owned your current primary residence for the past five out of eight years, you can get a reduced tax credit up to $6,500. But wait!  If you’re married your spouse must pass this same test and it doesn’t matter if you file jointly.  The credit equals the lesser of: (1) $6,500, or (2) 10% of the price of the replacement home, or (3) $3,250 for a buyer who uses married filing separate status.  Can you tell this was written by a bunch of tax law loving attorneys?    
    
3. Moving on…this next bit of info is basically the same.  If you’re a first time home buyer, you can still get up to an $8,000 tax credit.  You (and your spouse if applicable) can not have owned a home previously in the past three years.  You’ll get the tax credit in the following manner either: (1) the lesser of $8,000, or (2) 10% of the home purchase price, or (3) $4,000 if you use married filing separate status.
    
4. You’re not punished if you make beau-coup bucks!  After Nov. 6, 2009.   If you’re unmarried and file separately you can make between $125,000 and $145,000 (way to go top wage earner!).  This is up from between $75,000 – $95,000.  If you’re married and file jointly you can make between $225,000 and $245,000 (way up from the previous range of $150,000-$170,000).
    
5. And now those big buck earners can purchase homes up to $800,000…let the spending spree begin!
    
6. Here’s a nice update that should have been included in the first place.  You have to be 18 to purchase.  (This is typically the case with contracts anyway since you need to be 18 for them to be enforceable).  These new rules are intended to shut down the practice of claiming the credit for youngish buyers who really don’t even have incomes of their own (like college students who use money from their parents to buy a pad near campus).
    
7. You know it was broad when you now need Anti-Fraud. A recent government report said the IRS has already identified over 100,000 returns with potentially fraudulent home buyer credits. This is hardly surprising when the government is willing to give away up to $8,000 in free money to anyone who files a return, even when that person reports no income. Believe it or not, absolutely no documentation was required to claim the credit, until now. For credits claimed on 2009 and 2010 returns, buyers must attach a properly executed real estate settlement sheet to the return. Also, the IRS can now simply disallow credits in fishy circumstances (like when it appears the $8,000 credit is being claimed by someone who already owns a home).
    
8. You can claim the credit on previous years tax returns, you’ll just need to file an amendment.  You can also claim the credit for a 2010 purchase on your 2009 Form 1040. This allows you to cash in on the credit sooner rather than later, and it may also allow you to claim a larger credit if your income in the year of purchase is higher than in the preceding year. 
    
9. I have to pay it back?!  Well not necessarily…Under old-law rules for homes purchased between April 9, 2008 and Dec. 31, 2008, buyers are generally required to repay the credit over 15 years. However, this repayment rule is generally eliminated for purchases after 2008. That said, you might still have to repay the credit if you sell your home within three years of the purchase date or stop using it as your principal residence during that period.
    
10. Give special treatment to the military.  ABSOLUTELY!!  This should always be the case as these brave men and women continually fight for our freedom every single day.  Personally I think we should give them a much larger amount to help them buy a home.  But for the military service members on extended duty outside the U.S., the new law lengthens the deadline for closing on home purchases for an extra year, to April 30, 2011 (or June 30, 2011 for homes under contract on April 30, 2011). The new law also waives the credit repayment rules for service members who are forced to move due to receiving new orders. The same special rules apply to members of the foreign service and intelligence communities.