2008 INCOME TAX CHANGES: (American Housing Rescue and Foreclosure Prevention Act of 2008)

LIMITATIONS ON EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL RESIDENCE

• This only applies to sales AFTER December 31, 2008!

• Gain from the sale of a principal residence home will no longer be excluded from gross income under Code Sec. 121 ($250,000 / $500,000 exclusion) for periods that the home was not used as the principal residence.

• This is very complex. Computation will be difficult and often confusing. Basically, a percentage of the exclusion is lost for other than personal residence use occurring after 2008. Renting out the home, and business use of part of the home are examples of non-qualifying use.

DEDUCTION FOR STATE AND LOCAL PROPERTY TAXES EVEN IF NOT ITEMIZING

• A maximum $1,000 for Joint Filers, and $500 for Single Filers can be deducted without itemizing deductions. Extended through 2009.

NEW REFUNDABLE TAX CREDIT FOR FIRST-TIME HOMEBUYERS.THIS IS NOT A CREDIT, IT IS AN INTEREST FREE LOAN!!!

• Unlike other credits this "first-time homebuyer credit" must be repaid in equal installments over 15 years, essentially making it an interest-free loan from the government for most qualifying homeowners.

• This is a temporary refundable tax credit equal to 10 percent of the purchase price of a home, up to $7,500 ($3,750 for married individuals filing separately)

• A person is considered a “first-time homebuyer” if he or she (or spouse) had no ownership interest in a principal residence during the three-year period before the new home is purchased.

• The new credit phases out for married couples filing jointly with modified Adjusted Gross Income (AGI) between $150,000 and $170,000 and for single taxpayers with modified AGI between $75,000 and $95,000.

• Renters who also own a vacation home may qualify for the credit since the three-year look back period for owning a home applies only to owning a 'principal' residence.

• The individual must claim the credit on a 2008 or 2009 tax return. However, a first-time buyer who purchases a principal residence in 2009 after filing a 2008 return has the option of filing an amended 2008 return to claim the credit.

SELLER DOESN'T HAVE TO GIVE SOCIAL SECURITY NUMBER TO BUYER:

(Escrow company doesn't give to seller, but Escrow Company still reports sale information to IRS).

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