Thursday, April 10, 2008

New bill takes tax approach to foreclosure assistance

WASHINGTON (4/10/08)—The leader of the House tax-writing panel has introduced another in the growing line of foreclosure assistance measures. The legislation drafted by House Ways and Means Chairman Charles Rangel (D-N.Y.) would provide tax credit for first-time homebuyers and work to improve access to low-income housing.

Rangel's committee voted 35 to 5 in favor of the bill Wednesday, and the chairman said he expects The Housing Assistance Tax Act of 2008 to reach the House floor for consideration in the coming weeks.

"We need to provide relief to the buyers and families themselves, not just the banks and builders," said Rangel of his bill, which he said, "puts families first - offering a refundable tax credit to first-time homebuyers, essentially a zero-interest loan to help defray the cost of purchasing a house."

The bill will also expand a low-income housing tax credit, a move intended to put builders to work and to create affordable alternatives for families seeking new housing.
The main provisions of the Rangel bill include:
  • The first-time homebuyer tax credit to assist in making a down payment on a home, which would provide individuals and families with a refundable of 10% of the purchase price of their home, up to $7,500. Taxpayers would be required to repay any amount received under this provision to the government over 15 years in equal installments, making it in essence an interest-free loan. The credit would be phased out for taxpayers with adjusted gross income in excess of $70,000, or $110,000 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 $350 ($700 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 a current limit of the credit from $2.00 for each person residing in a state by an additional 20 cents per resident. The credit would also be simplified to improve its effectiveness; and
  • A temporary increase in mortgage revenue bonds to allow for the issuance of an additional $10 billion 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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