HAP tax exemption and first time home buyer tax credit for veterans

The Service Members Home Ownership Tax Act of 2009 would extend for one year the deadline for utilizing the first time home buyer tax credit for qualifying service members. This provision helps ensure that service members who are stationed overseas can take full advantage of the credit when they return.  The credit is currently scheduled to expire on November 30, 2009 and provides for $8,000 of tax credit.

The extension includes members of the military as well as Foreign Service members and intelligence workers.  To qualify, individuals need to have served outside the country for at least 90 days in 2009.

The legislation passed the House and is now under consideration by the Senate.

Veterans waived from repaying the tax credit

Veterans would also be waived from repaying the tax credit, if a veteran receives official orders to move and therefore is forced to sell the home bought utilizing the tax credit. Currently all home buyers using the tax credit have to repay the credit if the home is sold within 36 months.

HAP tax exemption

The legislation also makes certain Housing Assistance Program (HAP) payments made to veterans tax exempt.

The American Recovery and Reinvestment Act of 2009 (Recovery Act) expanded the existing Housing Assistance Program to assist military personnel selling a home that declined in value as a result of the mortgage crisis. However, the Recovery Act did not include a corresponding expansion of the tax exemption for these new beneficiaries of the HAP. As a result, any payments made as a result of the HAP expansion included in the Recovery Act are not tax exempt. The legislation would extend the tax exemption for these HAP provisions.