Some military personnel qualify for extension of expired tax credit
Some U.S. service people and other government employees are still eligible to obtain up to $8,000 in tax credits for buying a home, even though the federal program expired for most Americans in April.
Q. My husband is in the Marine Corps and is stationed in Afghanistan. He was scheduled to come home in March, and we were planning to buy our first home and get the $8,000 tax credit for first-time buyers, but his tour of duty was extended and now the credit program has expired. Is there anything we can do?
A. Yes. Although the tax-credit plan disappeared for most buyers about a month ago, many so-called "qualified service members" have an extra year - until April 30, 2011 - to buy their first home and still qualify for this valuable tax break.
Congress and the Internal Revenue Service defines "qualified" as any member of the uniformed services of the U.S. military, a member of the U.S. Foreign Service or an employee of the government's intelligence community. The special program was approved because so many service people and other government workers have had their overseas duties unilaterally extended by Uncle Sam, and thus were unable to purchase a house by the original deadline.
The extension comes with a few strings attached. For starters, the extended duty must have been for a minimum of 90 days and occurred between Dec. 31, 2008, and May 1 of this year. Also, the same income limits that applied to the recently expired program apply to service people seeking an extension: The credit is not available to single taxpayers who earn more than $125,000 or joint filers who make more than $225,000.
Remember, though, that the IRS defines "first-time buyers" rather loosely. It includes anyone who has not owned a principal residence during the three years before the purchase. A separate program that provides a $6,500 tax credit for buyers who don't meet the three-year requirement also has been extended for qualified service personnel until April 30, 2011.
Contact a tax professional for details. Also visit federalhousingtaxcredit.com, a website operated by the nonprofit National Association of Home Builders.
Q. We bought our home last year with a fixed-rate mortgage that has a very low interest rate. Now our lender is being acquired by a bigger bank. Can the new bank change the rate on our current loan?
A. No. Federal law prohibits the new bank from unilaterally changing the terms of the mortgage contract that you signed with the original lender. The new financial institution can change the address where you must send future payments, but that's about all.
Q. I like to read the real estate advertisements in this newspaper to see how prices are doing. I know that "BR" is shorthand for "bedroom" and that "BA" stands for "bathroom." But what is an "FDR," a "CAC" and a "WBF"?
A. The term FDR is realty jargon for a formal dining room - a separate room for eating, rather than a breakfast nook or other dining area that is part of a kitchen or larger room. If the home is advertised as having CAC, it means that it has central air-conditioning. And if it has a WBF, the buyer would enjoy its wood-burning fireplace when the winter comes. Some believe real estate agents use such confusing abbreviations as part of their marketing plan to get potential buyers or sellers to call, but it's not true. Advertising a home that's for sale can be expensive, because most newspapers charge a set fee for each line of their ads; agents save both time and money by using abbreviations.
Q. We finally got around to creating the type of basic living trust that you often recommend in your column. We put the title to our house and our motor home into the trust. Now that the trust has been created, do we also have to make a will?
A. You don't have to make a will, but it would be a good idea. Forming a living trust is a smart and inexpensive way to ensure that your most valuable assets, such as a home or recreational vehicle, can pass quickly to your chosen heirs instead of forcing your heirs to endure long and costly legal proceedings in probate court. But creating a will is also a good idea, in part because it can be used to distribute the assets that you intentionally or inadvertently leave outside the trust.
• For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960.
© 2010, Cowles Syndicate Inc.