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Housing starts and home sales got a nice bump in March and April as the $8,000 tax credit for first-time buyers came to a close. The landmark program, along with its $6,500 companion credit for existing homeowners, has helped prop up the flailing housing market and inject some confidence into the greater economic landscape.

There have been rumblings that the successful-but-costly program might get a third extension. But that’s increasingly unlikely. Representatives of both the National Association of Realtors and the National Association of Home Builders told the Wall Street Journal recently that a push to re-extend the program isn’t on the table.

As real estate agents and home builders prepare for a return to normal, it’s important to remember there’s still one last surge waiting in the wings: Military buyers.

Military members serving our country on extended duty in places like Afghanistan, Iraq and elsewhere have a bit more time to take advantage of the tax credits — an entire year, to be exact. Service members who meet the eligibility requirements for the exemption have until April 30, 2011, to enter into a sales contract on a home and until June 30, 2011, to close on the property.

Like all other borrowers, military members have to adhere to the program’s conditions and requirements , which include:

·         First-timer buyers (and their spouses) cannot have owned a home in the previous three years.

·         Individuals can’t make more than $125,000 per year; married couples cannot have an annual income greater than $225,000.

·         The cost of the home cannot exceed $800,000.

Veterans who are existing homebuyers might be able to qualify for the $6,500 tax credit, provided they have lived in the same home for five of the last eight years. Otherwise, the requirements and conditions are the same as for the $8,000 tax credit.

As important as these tax credits have been for everyday buyers, they might actually be even more significant for military borrowers. Eligible veterans and active duty service members can combine the tax credits with the no- and low-cost benefits of VA loans  to save a substantial amount of money on a home purchase.

About the writer: Chris Birk writes about real estate and the mortgage industry for a host of sites and publications, including Bigger Pockets, Mortgages Unzipped and Lenderama.

As with many good things in life – there are always a few people who are doing what they shouldn’t. In this case, there are quite a few people claiming that they are eligible for the 8000 tax credit when in fact they are not eligible for whatever reason.

If someone tries to claim the 8000 tax credit and is not eligible, this is considered tax fraud.

And according to the AP, there are more than just a few people who are trying to claim the tax credit that shouldn’t be.

Treasury Inspector General for Tax Administration J. Russell George told a House panel that more than 19,000 people filed 2008 tax returns or amended returns claiming the credit for homes they had not yet purchased. Those claims amounted to $139 million and it was not clear that the IRS planned to go back to verify that those purchases actually took place, he said.

But that isn’t the only way that some people are trying to defraud the system:

George said his office had identified another $500 million in claims, by some 74,000 taxpayers, where there were indications of prior home ownership.

And even more shocking – there were more than just a few people who were under the age of 18 (and as young as 4!) who tried to claim the tax credit:

He told a House Ways and Means oversight subcommittee that they also found 580 taxpayers under the age of 18 who claimed $4 million in first-time home buyer credit. One was 4 years old.

With the recent announcement of the extension and expansion of the 8000 tax credit, one can only hope that there are more controls in place to catch these kinds of frauds.  According to Mr. George, the IRS has tightened up on the controls they had in place:

George said that while the IRS has since taken steps to tighten oversight, “some key controls were missing to prevent an individual from erroneously or fraudulently claiming the credit.”

Let’s hope so. Losing a few hundred million to fraud isn’t exactly the thing that is going to be what bankrupts the country…

But it sure doesn’t help our overall financial situation.

With the success of the $8000 tax credit for first time home buyers in 2009 – Congress has recently decided to add an additional incentive for people who are not first time home buyers – but move up home buyers.

Move up home buyers are those people who currently own a home, but go out and buy a different home (usually a bigger or nicer one) to live in as their primary residence.  For much of the 1990′s and early 2000′s, the move up home buyer was the backbone of the housing market.

According to UPI, the move up home buyer tax credit may not spur as many new sales as the first time home buyer credit:

“On a percentage basis, the effect of the tax credit would be much smaller for current homeowners,” observed Thomas Popik, research director for Campbell Surveys. “We estimate that the first-time homebuyer tax credit will result in a 10 percent increase in home sales from March through November of 2009. We’d expect the effect of the proposed tax credit for current homeowners to be about half as large–from December until the tax credit expiration in the spring of next year, it might be five percent of three million transactions, or about 150,000 incremental home sales. Incremental sales to first-time homebuyers could be an additional 300,000, for a total of 450,000 incremental sales due to the tax credit extension.”

Here are the highlights to the 6500 tax credit for move up buyers:

• For “long time resident” homeowners who are purchasing a new home, the tax credit is 10% of the purchase price, with a maximum credit of $6,500.
• The income limits are now $125,000 for individuals / $225,000 for couples.
• The purchase price of the house must be below $800,000.
• Only primary residences are eligible for the tax credit. No second home or investment properties are eligible for the tax credit.
• For members of the Armed Forces deployed on duty outside the United States, the tax credits are extended to May 1, 2011 (must close before July 1. 2011) Must be deployed outside the U.S. for at least 90 days between Dec 31, 2008 – May 1, 2010.
• Due to fraud in the 2009 new home buyers tax credit, more fraud prevention measures are now in place – so make sure you qualify before applying for the credit!

If you still have questions about the 6500 tax credit for move up buyers, be sure to ask your loan officer or your CPA – but make sure you hurry before the credit expires this spring!