President Bush signed the Housing and Economic Recovery Act of 2008 on Wednesday, July 30th, 2008, which contained tax provisions titled the Housing Assistance Tax Act of 2008. There are many changes that will affect the 2008 tax year, and I hope to cover them in the next week for you.
Here are some great resources:
William’s Tax Planning Blog @About.com – great summary of the changes.
Property Tax Deduction for Non-Itemizers
This is a great deduction for taxpayers who no longer itemize because they are either retired or have paid off their mortgage. It is a limited deduction in that you get the lower of 1) the amount of real property taxes paid during the year or 2) $500 for single or $1000 for married filing joint. The deduction would be an increase to the standard deduction and it is available for 2008 only.
This will help many of our retired clients, and even though it is a limited deduction – every little bit helps when you are retired. However, this bill really only helps the retired and lower-income homeowners. In Oregon, taxpayers with moderate to high AGI who listened to Dave Ramsey and paid off the mortgage on their primary residence will mostly likely not receive any benefit because they still itemize based on the state income tax itemized deduction. For most of us that are still working and paying a mortgage, this new deduction really does not help much at all; however, should we really look to the government to solve all our problems?
In Part II on the Housing Assistance Tax Act of 2008, I plan to discuss some of the bad news from the new Act – mainly the closing of a great loophole regarding the Code Sec 121 Home Sale Exclusion. I’ll try and soften the blow as much as I can, but it does not look good.