Highlights of the Tax Provisions of the Housing and Economc Recovery Act of 2008

August 08, 2008

Last week, the President signed the Housing and Economic Recovery Act of 2008 (the "Act") into law. Tax
provisions contained in the Act include the following:
 
First Time Homebuyers Tax Credit
The Act gives first time homebuyers a temporary tax credit equal to 10% of the purchase price of a home, up to $7,500 ($3,750 for those who file married filing separately). The credit begins to phase out for taxpayers with adjusted gross income over $75,000 ($150,000 for joint filers). The credit must be repaid in equal installments over 15 years. The credit is available for homes purchased on or after April 9, 2008 and prior to July 1, 2009. 
 
Property Tax Deduction for Nonitemizers
For tax year 2008, nonitemizers can increase their standard deduction by the lesser of the amount of real property taxes paid during the year or $500 ($1,000 for joint filers). 
 
Low Income Housing Tax Credit
The Act increases the current cap from $2.00 to $2.20 per resident multiplied by the state's population for 2008 and 2009. The new law also simplifies many of the provisions of the credit. 
 
FIRPTA
The Act allows a seller to produce the FIRPTA affidavit to the title or escrow company handling the closing of the sale in order to protect the privacy of the seller's taxpayer identification number. 
 
AMT Limitations
The Act allows taxpayers to use the Low Income Housing Tax Credit and the Rehabilitation Tax Credit to offset AMT liability. 
 
Reduced Home Sale Exclusion
Effective for home sales after 2008, the gain from the sale of a principal residence will no longer be excluded from gross income for periods it was not used as a principal residence on or after January 1, 2009. The amount of the gain allocated to periods of nonqualified use will be the total gain multiplied by a fraction, the numerator of which is the aggregate periods of nonqualified use and the denominator is the period of ownership. If you would like more information on the Housing and Recovery Act, please contact Christine Burke Worthen, a shareholder and Chair of Eaton Peabody's Tax Practice Group, whose practice areas include ERISA and employee benefits.
 
 
This alert is provided as general information, and is not a substitute for legal or other professional advice.
 
To ensure compliance with requirements imposed by the U.S. Treasury Department and the Internal
Revenue Service, we also inform you that any federal tax advice contained in this communication (including
attachments) is not intended or written to be used, and cannot be used, for the purpose.