Tax Guides Updated with Housing Bill Legislation

On July 30th, the President signed into law the Housing and Economic Recovery Act of 2008.  This legislation occurred after the samples of the 2008-2009 Tax & Financial Planning Guides were printed.  But there’s good news!  The guides that you distribute to your prospects, customers and clients have been updated with these key points from the new legislation:

Taxpayers who don’t itemize can deduct their property taxes in 2008 in addition to taking the standard deduction.  The deduction is capped at $1,000 for couples and $500 for individuals. 

Eligible first-time home buyers who purchase a main residence between April 8, 2008 and July 1, 2009 will get a tax credit of up to $7,500.  There are conditions which must be met, of course.  The credit phases out at AGI $150,000 - $170,000 for married couples and $75,000 – $95,000 for singles.  The credit will need to be repaid over 15 years starting two years after the year in which the property is purchased.  If the residence is sold before the credit is fully recaptured, the seller will pay tax on the gain from the sale or the unpaid balance of the credit, whichever is less.

Turning a second home into a main residence after 2008 will be a little more complicated tax-wise when the home is sold. Some of the profit from the sale may not benefit from the full home-sale exclusion of $500,000 for marrieds, $250,000 for individuals.  The taxable portion of the profit will be based on a ratio of the number of years after 2008 that the home was a second home to the total number of years owned. The remainder of the profit may qualify for the exclusion.