Tax Credit Updates for May 2010

Posted on May 19 By MLP Blog

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.

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