Housing Assistance Tax Act of 2008

RIA Practice Alert The “Housing Assistance Tax Act of 2008,” the 96-page tax title of the recently enacted “American Housing Rescue and Foreclosure Prevention Act of 2008” (P.L. 110-289) carries a couple of breaks for residential real estate—a new tax credit for “first-time” homebuyers and a new property tax deduction for nonitemizing homeowners—along with a controversial new restriction on the Code Sec. 121 exclusion. The restriction is intended primarily as a device to restrict or eliminate tax-free homesale profits for those who use the exclusion once on a principal residence sale and then convert a vacation home to principal residence use and sell the second home for another tax-free homesale profit. However, as this article illustrates, the complex new restriction on nonqualified use could create major headaches for those selling homes down the road, even those who never owned more than one home.