financesforeveryday.com

Good news coming out of Congress.  The Housing Assistance Act of 2008 just passed contains a couple of nice provisions for the 2008 tax year.  The first – is for those who own their home, but have not itemized in past because the standard deduction was higher.  You will now be able to take a partial deduction for property taxes in addition to the standard deduction.  

For a single taxpayer the deduction will be $500 and for a MFJ taxpayer, the deduction will be $1000.  You must pay at least that much in property taxes.  There are no income restrictions.  Special note:  as of right now this deduction is only for the 2008 tax year.  

The second provision is a tax credit for first time home buyers who purchase a house between April 9, 2008 and July 1, 2009.  A first time home buyer is someone who has not had an ownership interest in a residence in the preceding three years.  The credit is $7500 ($3750 MFS) or 10% of the purchase price of the house, whichever is less.  

There are income limitations for this credit.  For a single taxpayer, income must be below $95,000 with phase-out beginning at $75,000.  For a MFJ, income must be below $170,000 with phase-out beginning at $150,000.

There is a special allowance that if you purchase the house during 2009, you can still claim the credit on your 2008 tax return.

Beginning with the second year after taking the credit, you must start to recapture the credit.  You will recapture the credit over the next 15 years.