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50+ Home Owners See Tax Benefits in Housing Bill
Tax incentives provided under the landmark Housing and Economic Recovery Act of 2008 enacted at the end of July may be especially helpful to home owners who are preparing for their retirement years, according to NAHB tax analyst Robert Dietz.
The temporary $7,500 tax credit for first-time home buyers — the most widely publicized of the numerous benefits in the legislation for home buyers, home owners and renters — will make it easier for some older home owners to sell an existing home on the market and make a retirement-related move to new housing, he said.
With the availability of the tax credit, some owners of first homes will be better able to sell their existing property and move up the housing ladder, boosting demand far beyond the starter housing market, Dietz explained.
Of further interest to 50+ home owners, he said, is a provision under the bill that has established an additional standard deduction for property taxes paid on an owner-occupied home in 2008. This will enable home owners to get a break on their federal income tax to partially offset their 2008 local property payments, even if they do not itemize their deductions.
Because they tend to own homes with little or no deductible mortgage interest debt, 50+ home owners are less likely than the general population to itemize deductions on their income tax return.
According to the Census Bureau’s Housing Vacancy Survey data, more than 80% of 55+ households own their own home, but according to NAHB estimates of IRS data only 44% of primary taxpayers who are 55 or older itemize their deductions.
The tax code allows taxpayers to deduct state and local property taxes, but only if they itemize their deductions on Schedule A of their tax forms. But only one-third of taxpayers itemize in a given year, Dietz said.
Taxpayers who do not itemize instead claim the standard deduction, which in tax year 2008 is $10,900 for married couples filing a joint return, $5,450 for single taxpayers and $8,000 for taxpayers filing as heads of household.
The new provision allows non-itemizing home owners to add an additional amount to their otherwise applicable standard deduction. This additional standard deduction is equal to the amount of state and local property taxes they would deduct if they itemized, up to a maximum of $1,000 for married taxpayers and $500 for single taxpayers.
Taxpayers who use the new provision will save several hundred dollars on average for tax year 2008.
A special NAHB Web site — www.federalhousingtaxcredit.com — provides comprehensive information on the first-time home buyer tax credit.
For more information, e-mail Rob Dietz, or call him at 800-368-5242 x8285.
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