New law provides home tax breaks
The Housing Assistance Tax Act of 2008,
part of the housing bill signed into law on July 28, includes two
homeowner-targeted provisions that may benefit you — and one that could
hurt.
Here's a recap.
First-time homebuyer credit.
Purchase your first home on or after April 9, 2008, and before July 1,
2009, and you may be able to take advantage of a federal income tax
credit of up to $7,500.
- You're considered a
"first-time homebuyer" if you had no ownership interest in a principal
residence in the U.S. during the three years before the purchase.
- The credit is refundable,
so you could get money back if the amount you're eligible to claim is
more than the tax you owe.
- The credit is reduced
when modified adjusted gross income exceeds $75,000 if you're single
and $150,000 if you're married filing jointly.
- A house you construct
qualifies, but one you purchase from relatives generally does not.
- There's a recapture
provision, meaning you'll have to pay the credit back in most cases.
The payback period is spread over 15 years, beginning two years after
you buy your home.
Additional standard deduction.
For 2008 you can deduct real property taxes even if you don't itemize.
- The break takes the form
of an increased standard deduction.
- The amount of this
one-time benefit is the lesser of property taxes you actually pay
during the year or $500 ($1,000 for married filing jointly).
Reduced home sale exclusion.
Generally, up to $500,000 ($250,000 for singles) of gain on the sale of
your principal residence is tax-free, as long as you meet time and use
requirements.
- The new rules, effective
for sales after December 31, 2008, reduce the gain exclusion for
"nonqualified use," such as use as a rental or as a vacation home.
- The amount of the
reduction is based on periods of time after January 1, 2009, when the
home is not the principal residence of you, your spouse, or former
spouse. Some exceptions apply.
Other tax provisions include changes to the low
income housing credit, expansion and extension of Gulf Opportunity Zone
incentives, and an election to accelerate alternative minimum tax
credits and research credits in place of bonus depreciation.
For more information or planning assistance, give
us a call.
