The eagerly anticipated housing-rescue bill, also know as the Housing Assistance Act of 2008, is intended to calm the mortgage market, the real estate market, homeowners on the verge of bankruptcy and foreclosure, victims of bank failures and others whose lives are topsy-turvy this year.
You know what? This will cause alot of problems not calm them.
First Marketwatch Wrote the Article so I give them full credit.
1. Tax credit for new homeowners
First, we have a $7,500 credit for new homeowners that’s not really a credit. It’s a loan. Those who qualify to receive this credit will receive 10% of the purchase price of their home — up to $7,500, in the first year. Then they will repay the loan over a 15-year period, starting in the second year after the taxable year in which the house is purchased.
Video: Impact of New Housing Bill
Paul Bishop, economist for the National Association of Realtors, speaks with WSJ’s Sudeep Reddy about the implications behind a major housing bill signed into law on Wednesday. (July 30)
In other words, if you bought a home in August 2008, you start paying back 6.667% of the original credit on your 2010 tax return. This credit applies to purchases of new homes on or after April 9, 2008 and before July 1, 2009.
The good news:
-
This is a refundable credit. That means, even if your total tax liability is zero, you can file to get this money directly from IRS.
-
Although this is a loan, it’s a zero-percent loan.
-
Bonus: If you buy the home in 2009, before July 1, 2009, you can make an election to report the purchase on your 2008 tax return and get the refund a year early.
The bad news:
-
Mark Luscombe, principal tax analyst for CCH, a Wolters Kluwer business, points out that people who normally don’t have to file tax returns will need to start filing tax returns just to pay the credit back. That will affect seniors living on modest fixed incomes and Social Security.
-
If you forget to pay it back? Well, the bill doesn’t include any specific penalties. But all of IRS’s usual non-filing and non-payment penalties will apply. Expect IRS computers to track this and to issue notices for unfilled returns.
-
If you sell the house in less than 15 years, you will have to repay the rest of the credit immediately. This requirement is waived if the owner dies. There are special provisions when the house is sold due to divorces or other emergencies.
-
This is a temporary credit and may not be renewed once it expires on June 30, 2009.
-
The credit phases out for married folks, filing jointly, with modified adjusted gross income (MAGI) between $150,000- $170,000. For singles, the phase-out is at MAGI between $75,000-$95,000.
Who qualifies? Folks who haven’t owned a principal residence for three years before buying the new home. If you’ve owned a vacation home or timeshare, you will still qualify.
In long-distance marriages each spouse may buy his/her own home (principal residence). They will have to split the credit between them.
To read the full article and its a good read click here
