What does the homebuyer tax credit extension mean for homebuyers?

On July 2, President Obama signed the Homebuyer Assistance and Improvement Act of 2010. A principal provision in the Act affects those who entered into a binding purchase and sale 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 simply 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 have not previously entered into 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 homebuyer tax credit extension to September 30, 2010, and it alerts taxpayers to 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.

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