I wrote this morning about some of the provisions of the extended and expanded first-time homebuyer credit. Readers had more questions. Here are some answers:
Q. I recently sold my home of 17 years and am scheduled to close on my new home on Nov. 25th. Will I qualify for the $6,500 tax credit if I close this month? I've read and heard conflicting information. Some sources say you have to close after Dec. 1. I even called the IRS and they didn't know. The person I talked to could only quote the Washington Post which said Dec. 1.
A. My interpretation of the law is that the $6,500 credit kicks in for houses purchased after Nov. 6th. I ran the question by two tax professionals, which also agreed that the credit applies to sales after Nov. 6.
Q. I read your answer about a person being ineligible for a full or partial credit if they purchased a house earlier this year and had too high of income. Is there any leniency at all or is it black and white? Is the higher income not retroactive? Or, can they get a credit now with the higher income limits?
A. The law is the law. Congress had to cut off income limits at some point. Higher income limits are not retroactive. If you buy a house after Nov. 6, the higher income limits will apply for that sale.
Q. Your article clarified a point that a military buyer who is unable to live in the new house for three years because of military orders would not have to repay the credit.
However, there is a piece missing on the front end under who is eligible. The military may not be eligible for the tax credit if they do not meet other criteria: "You must have lived in your house for at least five years in a row any time during the eight years before the purchase of the new house." Is there a waiver here for the military?
If military can't meet this requirement, does this stop them from receiving a tax credit for purchase of the new house regardless of whether they stay in the new house three years?
A. I check with tax experts. Service members don’t have to repay the credit if they end up selling their house within three years because of a job transfer. Also, they get an extra year to buy a house and qualify for the credit. But the experts say they do not get more lenient terms for qualification, so they will have to meet that five year rule.