Home Buyer Tax Credit Extended

The Home Buyer Tax Credit was set to expire last month, but because of the high number of buyers who purchased homes by the April 30th deadline but were unable to close on their Chicago real estate, Congress has extended the closing date to September 30, 2010. Apparently, the demand to close by June 30th was greater than expected, thus overwhelming mortgage lenders. In addition, short sales and foreclosure purchases require more time to process, and as their number increased, so did the backlog of closings. The National Association of Realtors estimates that at least 180,000 home buyers were unable to settle by the June deadline and thus missed the opportunity to receive the tax credit.

tax creditSo what does this mean for you? If you purchased your Chicago real estate by the April 30th, you now have until September 30th, 2010, to close on your property. (Note: the new legislation applies only to those who did so. The purchase deadline was not extended.) Other than date changes, the terms of the original program still apply, allowing tax credits of up to $8000 for first-time buyers and $6500 for repeat buyers.

Included in the current bill are special provisions for members of the U.S. military forces, the foreign service, and the intelligence community. For those who fall into these categories and have been ordered on an extended (90 days or more between after December 31, 2008, and before May 1, 2010) tour outside the United States, the new extension allows for a binding contract to be in place on or before April 30, 2011, and a closing to take place on or before June 30, 2011. In addition, a person who is forced to return to the U.S. for medical reasons before completing the 90 day tour may qualify for a one year extension.

What do you need to do to claim the credit for your Chicago real estate purchase on your taxes?

  • If your 2009 return has not yet been filed, claim it on Form 1040 for tax-year 2009. While you cannot file this return electronically, you can still use IRS Free File to prepare and print it. When you send it in, you must attach special documentation and IRS Form 5405.
  • If you have already filed for 2009, claim the tax credit on an amended return using Form 1040X. Remember to check the above site for specific documents to include with your new return.
  • You may also wait and claim the credit on your 2010 tax return.
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