Extension of Closing Deadline for Eligible Homebuyer Credit Purchases

On July 2, the President signed the Homebuyer Assistance and Improvement Act of 2010. A chief provision in the Act affects those who entered into a binding contract on or before April 30, 2010 to buy a credit-qualified home. The Act extends the deadline to close from the original June 30, 2010 deadline to September 30, 2010.

The change in the law did not extend the time to actually buy a home.  It just extended the deadline to close on a purchase contract that met the April 30, 2010 binding contract date.

This extension of time was granted because the rush of purchase contracts that met the April 30, 2010 deadline overloaded lenders with paperwork they could not process by the June 30, 2010 finalization date.  Taxpayers that do not have a pending contract to buy a qualifying residence by April 30, 2010, would not qualify for the Homebuyer Credit unless Congress extends that deadline.

IRS Information Release 2010-080 discusses this extension to September 30, 2010, and it reminds taxpayers of the documentation required to be attached to their tax returns in addition to completing Form 5405, First Time Homebuyer Credit and Repayment of the Credit. 

To pay for the estimated $140 Million cost of this extension, these offsetting revenue raising provisions were also enacted:

• There is a delay in the transfer of set-up fees to the new Travel Promotion Board.
• There is a fine-tuning of the provisions relating to the “bad check” penalty to cover electronic payments.
• Prisoners will now have greater disclosures required on their tax returns in order to prevent tax fraud by incarcerated individuals.

PENDING SENATE ACTION
Prior to their 4th of July recess, there was some tax legislation proposed that is worth noting and following closely in the coming weeks:

• An extension of the 50-percent bonus depreciation provisions through the end of 2010.
• A doubling of the Code Section 179 expensing limit for 2010 and 2011 to $500,000, with a higher phase-out threshold.
• An exclusion of 100% for capital gains on qualifying small business stock acquired after February 17, 2009 and before January 1, 2011.
• An enhanced general business credit for small businesses.
• A reduced 5-year holding period for S Corporation property with built-in-gains.

Action on this legislation is expected before Congress adjourns for the August recess.