On July 30, 2008, President Bush signed into law a housing bill aimed at providing mortgage relief for more than 400,000 US homeowners facing foreclosure, primarily by allowing them to refinance high-interest, adjustable-rate mortgages, or ARMs, into less expensive fixed-rate loans backed by the Federal Housing Administration. Certain provisions will limit the number of homeowners who qualify, including a requirement that lenders write down loans to no more than 90 percent of a home's value. The program starts Oct. 1 and ends Sept. 30, 2011.
The Housing Assistance Tax Act of 2008 also includes these income tax provisions:
Credit for first-time home buyers, but it's really a loan
First-time home buyers are allowed a refundable tax credit of up to $7,500 for homes bought between April 9, 2008, and April 1, 2009. This is really an interest-free loan which is repaid ("recaptured") over 15 years. A taxpayer who is liable for the recapture tax must file an income tax return, even if not otherwise required to do so. The credit is phased out for taxpayers with adjusted gross income between $75,000 and $95,000 ($150,000 and $170,000 for joint filers). A “first-time home buyer” is an individual who had no present ownership interest in a principal residence during the three-year period ending on the date of the purchase of the principal residence to which the credit applies. If the individual is married, neither the individual nor his spouse may have had a present ownership interest in a principal residence during that three-year period. Taxpayers who purchase a residence after December 31, 2008, and before July 1, 2009, may elect to treat the purchase as made on December 31, 2008. Making this election allows the credit to be claimed on an original or amended 2008 tax return.
"Above the line" property tax deduction
For 2008 only, taxpayers who use the standard deduction can deduct an additional amount for state or local real property taxes. The additional deduction is limited to a maximum of $500 ($1,000 for joint filers).