As the First Time Home Buyer Credit was about to expire, a new extension was approved and it included some important changes to the original act that may allow more people to qualify than the original credit. Here is a summary of the important changes:
If the home was purchased before December 1, 2009, an amended 2008 return can be filed to process the credit now or you can wait until the 2009 tax return is prepared. If the closing was on or after December 1, 2009, the credit must be applied for on the 2009 return.
Keep in mind that the income limitations can be manipulated a bit for married couples or in cases where there are more than one unmarried people buying a home. If you are over the income limitation jointly, you may still be able to qualify for the credit by filing separately. If the lower earning spouse still qualifies for the credit based on income, you may still be able to take advantage of the credit by filing separately. Careful analysis is necessary to determine which method of filing (jointly or separately) yields the lowest overall tax liability.
This credit does not have to be prorated based on the ownership of the home. Therefore, if unmarried individuals are purchasing a home and one qualifies but the other does not, the full credit may still be available on the lower earner’s tax return.
Realtors and anyone selling a home should also be aware of these credit uses. Through our niche of working with real estate investors, we have successfully assisted several investors with contract for deed and seller financing arrangements with people who might not otherwise be able to purchase a home on their own. In a follow up post, I will describe some creative methods of using this home buyer credit for down payment financing methods.