American Housing Rescue and Foreclosure Prevention Act of 2008

H.R. 3221, the “American Housing Rescue and Foreclosure Prevention Act of 2008,” was signed into law by the President on July 30, 2008. It is designed to support the failing housing market and tighten lending practices and reform financial institutions associated with that market. Included in the bill is the “Housing Assistance Tax Act of 2008. The tax incentives are fully offset by revenue raisers.

Highlights:

New Tax Credit for First-Time Homebuyers

Qualified homes of first time homebuyers purchased after Apr. 8, 2008 and before July 1, 2009, are eligible for a refundable tax credit equal to the lesser of 10% of the purchase price of a principal residence or $7,500 ($3,750 for married individuals filing separately).

Two or more unmarried persons purchasing a home together will share the credit as described by the IRS in future rulings.

Phase out for single filers: MAGI between $75,000 and $95,000

Phase out for joint filers: MAGI: $150,000-$170,000

Definition – First Time Homebuyer – A homebuyer that has no present ownership interest in a primary residence in the U.S. during the 3-year period before the purchase of the new home subject to the credit.

The credit is subject to the regular recapture rules.

Eligible first-time homebuyers who purchase a principal residence after Dec. 31, 2008, and before July 1, 2009, may elect to treat the purchase as made on Dec. 31, 2008.

Unlike any other individual federal tax credit, taxpayers must repay the first-time homebuyer credit. They will have 15 years to repay the credit, interest free. Repayments start two years after the year in which the residence is purchased. Payments must be made in equal installments over those 15 years.

Property Tax Deduction for Non-Itemizers

Available only in 2008, taxpayers who claim the standard deduction instead of itemizing deductions are permitted to claim an additional standard deduction for state and local property taxes paid. The deduction can't exceed the lesser of state and local property taxes actually paid or $500 ($1,000 for joint filers)

  Interest Earned on Exempt Facility, Qualified Residential Rental, and Veterans' Mortgage Bonds Isn't an AMT Preference

For bonds issued after July 30, 2008, the Act provides that tax-exempt interest earned on the following instruments is not a preference item for AMT purposes:

(1)   Exempt facility bonds issued as part of an issue 95% or more of the net proceeds of which are used to provide qualified residential rental projects (2) qualified mortgage bonds and (3) qualified veterans' mortgage bonds.

Information Reporting of Merchants' Credit Card and Third-Party Network Sales—After 2010

After 2010, the Act generally requires banks to file an information return with IRS reporting the gross amount of credit and debit card payments a merchant receives during the year, along with the merchant's name, address, and taxpayer identification number (TIN). Similar reporting is also required for third party network transactions. This is a strong incentive to correctly report income. It is believed this will raise over $9.8 billion over ten-years.

Sources: (Web Sites)

www.irs.gov and  http://www.govtrack.us/congress/billtext.xpd?bill=h110-3221