Military homeowners benefit under latest tax-credit legislation
Reporting from Washington - The United States tries to take care of its warriors, a tradition that Congress has continued in little-known sections of the latest home buyer tax credit legislation and one of the government's main programs to help military owners who must sell their houses for less than what they owe.
Under the Worker, Homeownership and Business Assistance Act, which was signed into law in November, military personnel and certain other federal employees serving outside the country have an extra year to qualify for the $8,000 tax credit offered to first-time buyers and the $6,500 credit available to repeat buyers.
Under the new law, eligible taxpayers must enter into a contract to buy a principal residence by April 30, and close the transaction no later than June 30. But servicemen and women get an extra 12 months, so they must sign a binding contract by April 30, 2011, and close no more than 90 days later.
The rule applies to individuals or their spouses who serve on qualified official extended-duty service outside the country for at least 90 days between Jan. 1, 2009, and April 30, 2010. According to the IRS, only one spouse needs to be overseas on official extended duty for the requisite time to qualify.
For most buyers, if the home is sold or otherwise ceases to be used as a principal residence within three years of the initial purchase, the credit must be repaid. But when the home belongs to an eligible member of the armed services, intelligence community or Foreign Service, that provision is waived if the house is sold in connection with orders sending the taxpayer to a new duty station at least 50 miles away. The new post can be either inside or outside the U.S., but the change must occur because the taxpayer is under orders to move for a period in excess of 90 days or indefinitely.
Members of the military also may be eligible for help if they are forced to sell their homes for less than what they owe on their mortgages because of a mandatory, permanent duty transfer.
This assistance was mandated under the American Recovery and Reinvestment Act, the law that raised the first-time buyers credit from $7,500 to $8,000 and waived the original repayment requirements.
There are numerous rules and eligibility requirements, but here's a brief rundown of the expanded Homeowners Assistance Program, which is run by the Army Corps of Engineers on behalf of all the branches of the military.
Applications for aid will be processed according to eligibility in this order:
* Owners who were injured, wounded or became ill in the line of duty while deployed since Sept. 11, 2001, and are relocating for further medical treatment. Covered here are service members, including the Coast Guard, and civilian employees of the Defense Department.
* Spouses of the fallen who relocate within two years after the death of their mates.
* Owners affected by the 2005 round of base closings, without the need to prove that the closure caused local housing prices to decline.
* Members of the armed services who receive permanent duty station changes between Feb. 1, 2006, and Sept. 30, 2012.
Benefits are based on the prior fair-market value of the property, which is the purchase price as evidenced by the HUD-1 settlement sheet. But the amount may not exceed the 2009 conforming loan limits, which range from $729,500 in high-cost areas to $417,000 in other areas.
Sellers must make a reasonable effort to sell their homes for at least 30 days at current market value as determined by a Corps of Engineers automated valuation model. Then they must document how the price was gradually reduced until its "true current value" is reached.
When a home is sold for less than what it was purchased for, the program will "substantially offset" the loss up to 95% of the difference. The government will not make up past payments, nor will it pay outstanding judgments, personal encumbrances or junior liens. But it will pay all legally enforceable liabilities and for title services necessary to close the sale, as well as any other allowable closing costs.
For more information, contact the Corps of Engineers field office nearest you -- in Sacramento; Savannah, Ga.; or Fort Worth -- or go to www.usace.army.mil
Distributed by United Feature Syndicate.
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