Aug 5

Posted by Teri on August 5, 2008

On July 30, 2008, George W. Bush signed into law the Housing Assistance Act of 2008. Many think that this bill only deals with mortgage bailouts, but it is more expansive than that, and may actually affect many of you. Here are some of the key points (that do not include corporation givebacks—just the individual items)

• Property Tax Deduction For 2008 ONLY, a “real property tax deduction” is added to the standard deduction for non itemizers. What does that mean? For those who do not itemize (like senior citizens whose mortgages are paid off) and also own real estate, an additional deduction is added to the standard deduction up to $500 ($1000 for taxpayers filing jointly). This is effective for tax year 2008 ONLY.
• Refundable Credit for First Time Homebuyers: First time homebuyers are allowed a “refundable” tax credit for the purchase of a principal residence equal to the lesser of $7500 or 10% of the homes purchase price. (There are phase out provisions). So, whati s a first time homebuyer? It is an individual who has no present ownership in a principal residence during the three year period ending on the date of the purchase of the new home (nor may his or her spouse have had ownership). So what is the catch…: Those who claim the first time homebuyer credit are subject to “recapture” or paying it back with an increase in tax for the next 15 years (at 6 2/3 % per year). This is effective for principal residences purchased by the taxpayer after April 8, 2008 and is only good for purchases up to June 30l, 2009).
• Exclusion of Capital Gain from Sale of Residence!! Big nasty change! Currently, taxpayers are allowed to exclude up to $250,000 ($500,000 on a joint return) of the gain associated with the sale of their principal residence if they owned and occupied the property for 2 of the 5 years preceding the sale. The new law now changes this….Taxpayers will not be allowed to exclude any gain attributable to a “non qualified use”, even if they meet the 2 of 5 years rule. So, for example, if you rent your home because you were transferred and you are waiting for a market rebound prior to selling, even if you meet the 2 of 5 year rule, that gain is now taxable (There is a complicated formula for figuring this out). The law does not talk about any period before January 1, 2009, so it is effective for sales and exchanges after December 31, 2008. So, please contact us if you find yourself in that situation!
• Mortgage Bonds: Mortgage revenue bonds are tax exempt from federal income tax and will be used to provide some of the funding to refinance subprime mortgages.

There are a host of other items such as Alternative Minimum Tax for low income housing, state allocations, etc. The biggie for business that accept credit cards is Financial Institution Reporting (where credit card companies will now have to report all credit card sales to the IRS beginning December 31, 2010.

If you want any further information…let us know…We’ve got the law here for your review!

Tags: First Time Homebuyers, FORECLOSURE, Housing Assistance Act of 2008