Recently, title companies, attorneys, realtors and lenders were all frantically trying to complete closings on pending real estate transactions. June 30, 2010, marked the last day on which homebuyers had to complete settlement on their purchase of a principal residence in order to qualify for either the $8,000 or $6,500 refundable federal tax credit. If you missed the deadline, dont panic relief is on the way, according to Richard Marmon, an associate professor of accounting in the Rohrer College of Business at Rowan University, Glassboro, N.J., who holds advanced degrees in business, law and tax and is a certified public accountant, certified management accountant and licensed attorney.
The Senate approved the Homebuyer Assistance and Improvement Act of 2010 (HR. 5623) by unanimous consent, the day after the Houses approval by a vote of 409-5. This much-needed legislation, which extends the date on which a taxpayer has to close a real estate purchase to Sept. 30, 2010, was signed by the President on July 2.
In addition, New Jersey Gov. Chris Christie is poised to sign a similar state tax credit available for those who purchase a residence in New Jersey during calendar year 2010 (he has 45 days from June 10). The New Jersey Home Buyer Tax Credit Program (NJHTC) provides home buyers with a refundable tax credit of up to $15,000 or 5 percent of the home purchase price, whichever is less. If passed, this propitious pairing will provide a whopping $23,000 in cash for some taxpayers who buy a home before Oct. 1, 2010.
The federal credit is available for individuals and married couples who have not owned a home in the past three years and are currently under a written binding contract, dated prior to May 1, 2010, for the purchase of a principal residence. The credit, provided for in I.R.C. Code Sec. 36, is equal to the lesser of $8,000 for married couples ($4,000 for married individuals filing separately) or 10 percent of the homes purchase price.
Also, long-time residents who purchase a home after Nov. 9, 2009, may claim the credit as long as they have occupied the same principal residence for at least five consecutive years during the eight-year period ending on the settlement date of the new home. However, the credit for long-time residents is limited to the lesser of $6,500 for married couples ($3,250 for married individuals filing separately) or 10 percent of the homes purchase price. The federal credit has a modified adjusted gross income phase-out between $125,000 and $145,000 (single filers) and $225,000 and $245,000 for those filing a joint return. Other limitations prohibit dependents from claiming the credit, buyers under the age of 18 and any buyer or their spouse related to the seller. Qualified armed service members on official duty outside the U.S. are granted an additional year to settle on their new home for purposes of the credit.