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TAX PROVISIONS IN THE HOUSING ACT

TAX PROVISIONS IN THE HOUSING ACT

Certainly you are not surprised to learn
that the American Housing Rescue and
Foreclosure Prevention Act, P.L. 110-2889 sign
ed into law by President Bush on July 30,
2008 has tax provisions in it, ar
e you? It is known as the
“Housing Act” and it certainly
does have tax provisions. Here is a brief overv
iew of how this Act may affect your taxes:
There is first-time homebuyer tax credit of $7,500 ($3,750 for married persons
filing separately) which is tr
eated as a refund if your ta
x liability is less than
the credit. The unusual feature of this cr
edit is that is pa
yable back to the
government over 15 years ratably (accelera
ted if the residence is sold or
ceases to be principal residence). It pha
ses out for Adjusted Gross Income of
$150,000 to $170,000 for joint filers ($75,000
to $95,000 all other filers).
For 2008 only, there is a property tax de
duction allowed for non-itemizers for
the State and local proper
ty taxes limited to $1,000 on
joint filers ($500 all
other filers).
Reduced home sale exclusion for so
me sellers: the $500,000 exclusion of
home sale profits availa
ble under current law for jo
int filers ($250,000 for all
others) will be reduced proportionately
for the period of time a home was not
used as principal residence. This intended to reach the home owners who are
selling their residence, moving into their vacation home and after 2 years
selling it, thereby getting the exclusi
on on both properties. However, it will
reach the situation where the owner moves out and rents the property for a
period of time and then moves back in before selling. There are some
exceptions to protect against unfortunate
events such as health or employment
change related sales, up to 10 years ab
sence for military or certain government
employees.
Specialized Alternative Minimum Tax (AMT) relief is in the form of
removing certain tax exempt interest from the add back to income to
determine the AMT base of taxable inco
me. This applies principally to bonds
issued after July 30, 2008 that are
beneficial to the housing market.
As an alternative to the tax break to
corporations provided in the Economic
Stimulus Act of 2008 that permitted bonus
first year depreciation deductions
for 505 of most machinery, equipment and software placed in service after
2007 and before 2009, the Housing Act perm
its corporations
unable to utilize
this bonus depreciation for years after
3/31/08 to elect to claim additional
research tax credits or certain mi
nimum tax credits. This is a highly
specialized provision th
at will require partic
ular analysis of your
circumstances.
Information reporting of merchants’ credit
card transactions will be required
effective after 2010. This is to assist
IRS with tax compliance by merchants.
These are only summarized versions of
the provisions and highlights of the tax
changes in the Housing Act. It obviously is
necessary that we review your facts to
determine any effects this may have
on your personal or business situation.
by Charles H Moses, III

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