Housing Act 2008 - How will it affect you?
On July 30th President Bush approved the Housing and Economic Recovery Tax Act of 2008. Here are a few highlights of the changes made by the Act, which Multi CPA thinks you should be aware of:
A new refundable tax credit for first-time homebuyers
- If you have not owned a home before or during past three years, you are a first-time homebuyer and will be eligible for a tax credit equal to the lesser of $7,500 or 10% of the price of the home purchased between April 8, 2008 and July 1, 2009. This credit must be repaid over 15 years in equal installments (beginning with the 2nd tax year after purchasing the house) with no interest charge. It is like an interest-free loan.
- This credit will phase out if Modified Adjusted Gross Income is more than $75,000 for single taxpayers and $150,000 for joint filers.
- In married filing separately cases, each spouse will receive 50% of the credit.
- If you sell your house before fully repaying the credit, the remaining balance becomes due.
- Even if you purchase a house after December 31, 2008 but before July 1, 2009, you have an option to accelerate the credit with the 2008 tax return rather than waiting until the 2009 tax season.
Additional standard deduction for property taxes paid in 2008
Home owners who claim the standard deduction would get an additional deduction for property taxes paid in 2008. The maximum amount that can be taken for this additional standard deduction is the lesser of the actual property taxes paid or $500 for single taxpayers and $1,000 for joint filers. This may help you if your mortgage is almost paid off and do not have large expenses for the itemized deduction categories.
Limitation on the exclusion of gain from the sale of a principal residence
Beginning in 2009, the exclusion from gain on the sale of a principal residence will not apply to any gain allocated to periods of "non-qualified use." Such use is defined as when the taxpayer is not the principal resident of the house (i.e. when the house is used as a vacation home or rental). However, "non-qualified use" does not include periods before January 1, 2009 and of temporary absence with certain allowed reasons. If you sell the house before January 1, 2009, this tax rule change will not apply at all.
Please feel free to contact us for more detailed information at 847-437-4555.
