The Housing and Economic Recovery Act of 2008 - Signed Today By the President

Congress has just passed, and President Bush signed today, a $300 billion housing bill to help restore confidence in the housing and financial markets. The bill is called The Housing and Economic Recovery Act of 2008. The new law includes more than $15 billion in tax incentives. These are some of the major provisions.

First-time homebuyer tax credit - The credit is essentially an interest-free loan from the government. Taxpayers who take the credit, which equals 10 percent of the purchase price (up to $7,500 for single individuals and married couples filing jointly; $3,750 for married individuals filing separate returns), must repay the credit. They will have 15 years to repay the credit in equal amounts. If a taxpayer sells his or her home before the end of the 15-year period, he or she will likely have to immediately repay any outstanding balance. Important income thresholds also apply. Additionally, the credit is temporary and applies to homes purchased on or after April 9, 2008 and before July 1, 2009.

Borrowers - Many homeowners are trying to refinance mortgages that offered low teaser rates but whose rates have now skyrocketed. The new law authorizes states to issue $11 billion more in mortgage revenue bonds for 2008 and allows qualifying sub prime borrowers to use their state's mortgage revenue bond program to refinance into a loan with a more favorable rate.

Property deduction for non-itemizers -There is a new standard property tax deduction for taxpayers who do not itemize deductions. Before the new law, only itemizers could deduct state and local property taxes. The housing act gives non-itemizers a limited deduction for state and local property taxes by increasing the amount of their standard deduction by the amount of property taxes they paid or $500 ($1,000 for a married couple filing jointly). You might benefit from this deduction if you have paid off your mortgage and no longer itemize. This is available only for taxes paid in 2008.

Home sale exclusion - A married couple filing jointly can generally exclude up to $500,000 in gain (single individuals up to $250,000). Before the new law, if a second home becomes a principal residence, after two years the owner could sell it and exclude up to $250,000 in gain from their income or up to $500,000 for couples filing jointly. http://www.irs.gov/taxtopics/tc701.html The new law pro-rates the exclusion between the time that a home is used as a principal residence and the total length of ownership, which includes any "non-qualifying" use as a rental or vacation property. The non-qualifying use before the January 1, 2009 effective date of the provision is not used in the calculation; neither are periods after a qualified use of the property or temporary absences of less than two years.

Down payment assistance - Seller-funded down-payment-assistance programs provide cash assistance to homebuyers who cannot afford to make the minimum down payment or pay the closing costs involved in obtaining a mortgage. The new law bans seller-funded down payment assistance programs.

Military personnel - The housing bill includes many provisions to help military personnel on active duty and veterans avoid foreclosure. Under the new law, service members and veterans are protected from foreclosure for nine months following a period of military service (rather than the current 90 days). Congress also made the VA home loan program more attractive and provided funding for disabled veterans to make accommodations in their homes for their disabilities.

So that is all for now. I will keep you posted as I know more. If you have any questions or comments on this article, let me know. I would love to hear from you. Until next time, remember, have fun and create a great day.

Be well.