Last month, President Obama signed into law H.R. 3548, an expansion and extension of the homebuyer tax credit that otherwise would have expired at the end of November. Both the House and Senate passed the new legislation by wide margins.

In fact, instead of just extending the current $8000 for a few more months, there is a credit for current homeowners who purchase a new main residence between November 7 and April 30, 2010. The credit will be up to $6500 for married joint income tax filers and $3250 for single filers and married people, filing separately. One restriction is current homeowners must have resided in the home being sold consecutively for 5 of the last 8 years. A contract to purchase must be in effect on April 30 or before, and the purchaser will have until July 1, 2010 to close.

There are also income limits attached to the new home seller credit: $125,000 for single tax filers and $225,000 for married filers. The home may not cost more than $800,000, and the home may not be purchased by a dependent. They must live in the new residence for at least three years or they will need to pay the credit back.

The government estimates that 70 percent of homeowners will now be eligible for a credit should they choose to sell their home and purchase a new one within the designated timeframe.

What we do not see in the law is any restriction that would apply to homeowners who are selling their home by Short Sale. Normally, a Seller who sells a home at a loss that the Lender absorbs is not allowed to benefit from the sale of the home. However, in an effort to provide incentives for everyone to make property productive again, the federal government has been showing more interest in helping troubled homeowners more directly. The fact that the rules for this tax credit do not seem to exclude Short Sale homeowners is an indication of the government’s recognition that people in this situation are hurting and could use the tax break in order to get a clean start.

This is not the only incentive available to homeowners who complete a Short Sale. The Make Home Affordable guidelines from the Treasury Department for Home Price Decline Protection Incentives and Foreclosure Alternatives were updated in May and the directive that implemented new incentives for Lenders and junior lien holders also allow up to $1500 at a Short Sale closing for the Sellers to use toward moving expenses.

For the First Time Buyers the rules remain in place until April 30: To qualify for a tax credit the first time buyers may not have had an interest in a principal residence for 3 years prior to the purchase. Single filers and those who are married but filing individually is limited to $4000 in credit. The credit may not exceed 10 percent of the purchase price and will be prorated if the home was purchased for less. The extension period is from December 1 through April 30 for First Time Homebuyers.

Once again, Short Sale Investors continue to have an unprecedented opportunity not only to make money in this down economy, but to help families who are in trouble to make a new start by selling their homes at Short Sale.