David Stell discusses two bills that will bring changes to tax code

A: Two new bills signed into law this year — the Housing and Economic Recovery Act and the Emergency Economic Stabilization Act — together were responsible for well over 300 tax law changes. One important change for 2008 adds an additional standard deduction for those who don’t itemize deductions, but who pay real property taxes. The additional deduction amount is equal to the amount of property taxes paid up to $500, or up to $1,000 on a joint tax return. This is a temporary deduction, available only for 2008 and 2009.

Q: Can you tell us about the new first-time home-buyer tax credit that’s been in the news?

A: Under the law, people are considered first-time buyers if they haven’t owned an interest in a principal residence for three years before buying a home. The credit amount is equal to 10 percent of the home’s purchase price, up to $7,500. The credit amount for a person whose adjusted gross income is greater than $75,000, or $150,000 on a joint tax return, will be less. The home must be bought after April 8 and before July 1, 2009. This refundable tax credit, however, must be paid back in equal installments over 15 years, effectively making it a no-interest loan from the government.

Q: Do any of the new laws bring back any tax benefits that had expired?

A: Yes. The Emergency Economic Stabilization Act (EESA) included several "extenders," which held over or reinstated expired tax benefits. Among them are the option to deduct state and local sales taxes, the higher education tuition deduction of up to $4,000, and the up-to-$250 teacher’s out-of-pocket classroom expense deduction, all of which had expired in 2007. Also, another one-year alternative minimum tax "patch" was included for 2008, which again prevents many middle-income taxpayers from being affected by the AMT. More information about the EESA can be found online at http://thomas.loc.gov/cgi-bin/bdquery/z?d110:H.R.1424:. Additionally, IRS Publication 553, Highlights of 2008 Tax Changes, will be available from the IRS online at www.irs.gov after Dec. 31.

Paula Burkes, Business Writer

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