August 2008 Archives
new federal income tax benefits for homeowners. Part of the massive housing foreclosure bailout contains two provisions that can help homeowners even if they are not involved in a foreclosure.
1. People purchasing a home within the next year (April 8, 2008 - July1, 2009) will be eligible for a tax credit of up to $7,500 or 10% of the home purchase price whichever is lower. This is a refundable credit which means if your total federal tax bill is less than the credit - you get the difference! There are some minor caveats you should be aware of - Basically this will be an interest free loan as you are expected to pay the money back over 15 years beginning the 2nd year after you take the tax credit. And, ifyou sell the home before the amount has been entirely repaid you will be responsible for paying it off in full at that time unless you sell the home at a loss. Those choosing to take this tax credit will benefit from having excellent recordkeeping to track the credit and repayment over 17 years.
2. For folks who can't/don't itemize on their taxes but take the standard deduction, you WILL be able to deduct your property taxes paid during 2008 up to $500 for single and $1,000 married filing jointly. You can't deduct more than you pay in property taxes. This is a one time provision with the possibility that Congress will extend it in future tax years. So MFJ standard deduction for 2008 normally $10,900 can be as much as $11,900 (assuming your property taxes were $1,000 or more) and single filers will rise from the normal $5,450 standard deduction to $5,950 (assuming your property taxes were $500 or more).
Pennsylvania homeowners who filed a homestead exclusion are already seeing a reduction in their property taxes in 2008 due to changes in how state sales taxes are allocated as well as higher than expected gaming revenues so this federal property tax relief is an added benefit.
Low income senior citizens and disabled homeowners can also benefit from Pennsylvania’s Rent and Property Tax Rebate Programs. Eligibility guidelines are homeowners with incomes less than $35,000 and renters with incomes less than $15,000. The income calculation excludes half of any social security benefits. Generally the deadline to file for this program is June 30 for the rent/property taxes paid in 2007. Again this year the application deadline has been extended to December 30, 2008.