The Housing Assistance Tax Act of 2008 passed recently as part of the American Housing Rescue and Foreclosure Prevention Act of 2008 contained a number of important tax provisions. The two provisions of broadest effect are the first-time homebuyers credit and the allowance to Taxpayers who do not otherwise itemize deductions of a deduction for state and local property taxes.

First time home buyers

Qualifying home purchases after Apr. 8, 2008 and before July 9, 2009 may give eligible first-time homebuyers a refundable tax credit equal to the lesser of 10% of the purchase price of a principal residence or $7,500 ($3,750 for married individuals filing separately). The credit phases out for individual taxpayers with income between $75,000 and $95,000 ($150,000-$170,000 for joint filers) for the year of purchase. A taxpayer is considered a first-time homebuyer if he (or spouse, if married) had no present ownership interest in a principal residence in the U.S. during the 3-year period before the purchase of the home to which the credit applies. It's possible for a taxpayer who already owns a vacation home to claim the new credit, if he otherwise qualifies. A prior owner of a principal residence also can qualify as long as the 3- year test is met. If two or more unmarried persons purchase a home together, the $7,500 credit amount is to be shared among them in a manner that the IRS may prescribe. This may be significant for same-sex married persons. A home under construction is treated as acquired when it is occupied. The credit vests at the rate of 6 and 2/3% a year and is recaptured in part if the home is sold within 15 years. In effect, the credit is in part outright subsidy and in part interest free loan. This credit should be of interest to parents whose adult children need help buying a first home and to renters who want to take advantage of the depressed state of the residential housing market.

Standard deduction for property taxes

Taxpayers who claim the standard deduction instead of itemizing deductions can claim an additional standard deduction for state and local property taxes paid for 2008 and future years. The deduction can't exceed the lesser of state and local property taxes actually paid or $500 ($1,000 for joint return filers). This may be of interest to taxpayers who own fractional interests in vacation property with few other itemized deductions (for example, taxpayers in states without an income or sales tax such as New Hampshire) and others with few other itemized deductions.

Other provisions of the housing assistance tax act of 2008

Other tax provisions dealt with low-income housing tax credit rules, requirements for tax-exempt housing bonds, the impact of housing bond interest and credits on alternative minimum tax rules, tax breaks for businesses claiming research credits and bonus depreciation, and revamped REIT rules. The revenue cost of the tax title is offset with new rules requiring information reporting of payment card and third party network transactions, a delay in the application of worldwide allocation of interest election for foreign tax credit limitation purposes under the American Jobs Creation Act of 2004, and altered 2012 and 2013 estimated tax rules for large corporations.