Saturday, November 7, 2009

Additional Detail on Existing Homeowner Credit: Contract or Settlement Date?

We have seen a few folks question whether it is the contract date or the settlement date which determines whether an existing homeowner qualifies for the $6,500 tax credit. The National Association of REALTORs (NAR) is indicating that it is indeed the settlement date. Even if your buyer is already under contract, as long as the settlement takes place after President Obama signed the bill (and assuming he qualifies in all other respects), he is eligible for the credit.

From the REALTOR Action Center Blog "Frequently Asked Questions" document we shared earlier:

Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I will go to settlement on November 20. If President Obama has signed the bill by the time I go to settlement, will I qualify for the new $6500 tax credit?

Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.

As always, your buyers should seek the advice of a CPA to determine eligibility for any tax credit, but this is helpful information.