2008 Housing Assistance Tax Act

Congress’ action to help the slumping housing market may mean more money in your pocket.  Two provisions of the new $15 billion tax bill are of major interest.

First Time Home Buyer Credit

First-time home buyers purchasing a home after 4/9/08 and before 7/1/09 may receive a tax credit equal to 0% of the purchase price of a home that serves as your principal residence. The credit is up to $7,500 $3,750 for married filing separate). However, there are a few catches:

  • The credit phases our with income – between $150,000 and $170,000 married filers; $75,000 – 95,000 single filers
  • The credit must be repaid in equal installments over 15 years commencing two years after the home is purchased
  • If the home is no longer your primary residence the balance of the credit must be repaid in that tax year
  • The credit is paid through your tax return, so it will not help your cash flow when you close on your new home

Non-Itemizer

Property Tax Deduction

Homeowners who use the standard deduction versus itemized deductions could see their Standard deduction amount increase in 2008. This special one year provision allows
you to increase your standard deduction by the lesser of the amount of real property taxes paid OR $1,000 or a married couple ($500 if not married).

This benefit will help homeowners who have very little in itemized deductions (like seniors who have little in deductible interest expense because they have paid off their mortgages). This means the standard deductions for 2008 move from $10,900 for joint filers to $11 ,900 and from $5,450 to $5,950 for single filers that use this new tax law.