House Passes Bipartisan Housing Tax Package

by Leroy Baker, Tax-News.com, New York

14 May 2008

The US House of Representatives on Friday passed a comprehensive package of measures aimed at stemming the tide of foreclosures, stabilizing local housing markets and providing incentives for first-time homebuyers.

The tax provisions in the bill, authored by Ways and Means Committee Chairman Charles Rangel (D-NY), passed with a strong bipartisan vote of 322-94.

The provisions included tax credits to first-time homebuyers, measures to improve access to low-income housing and allow families to deduct property taxes, as well as other real estate reform provisions.

“Congress has acted to strengthen the housing market and provide relief for those struggling in the current economic downturn,” said Rangel.

“The legislation we passed today will help families facing foreclosure keep their homes, help others avoid foreclosure and help our communities rebound from these hard times."

"In addition, we have provided new tax incentives for first-time homebuyers and improved the low-income housing tax credit to make sure that everyone, regardless of income, has access to affordable housing during times of economic stress.”

The main tax provisions included in H.R. 3221 as passed by the House include:

• A first-time homebuyer tax credit to assist in making a down payment on a home. This would provide individuals and families with a refundable credit (equivalent to an interest-free loan) of 10% of the purchase price of their home (up to USD7,500). Taxpayers would be required to repay any amount received under this provision to the government over 15 years in equal installments. The credit will be phased out for taxpayers with adjusted gross income in excess of USD70,000 (USD140,000 in the case of a joint return).
• An additional standard deduction for real property taxes to help homeowners who claim the standard deduction by allowing them to claim an additional standard deduction of up to USD350 (USD700 for joint filers) for State and local real property taxes. This provision applies for 2008.
• A temporary increase in low-income housing tax credit and simplification of the credit. The bill would increase the current limit of the credit from USD2.00 for each person residing in a state by an additional 10%. This will help put builders to work to create new options for families seeking affordable housing alternatives. The credit will also be simplified to improve its effectiveness.
• A temporary increase in mortgage revenue bonds The bill would also allow for the issuance of an additional USD10bn of tax-exempt bonds to refinance subprime loans, provide loans to first-time homebuyers and to finance the construction of low-income rental housing.

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