September 2008

Online Tax and Business Alert Homepage

The goal of the Maginnis & Carey Tax and Business Alert is to provide you with current articles on various tax and business topics. The articles are intended to keep you up to date on trends and issues that may impact your business and personal financial affairs.  Please contact us if you have questions about any of the issues discussed.

Temporary Credit for First-time Homebuyers:

The recent American Housing Rescue and Foreclosure Prevention Act of 2008 (Housing Act) created a temporary credit to encourage home ownership. This new credit is for first-time homebuyers and can be as large as $7,500 ($3,750 for those who use married filing separate status), but is limited to 10% of the home’s purchase price.

Tax Calendar:

Important upcoming Tax dates.

Temporary Property Tax Deduction for Non-itemizers:

Thanks to a provision in the recent Housing Act, for 2008 only, an unmarried taxpayer who doesn’t itemize can add up to $500 of state and local real property taxes to his or her “normal” standard deduction amount..

New Online Payment Reporting Requirement:

Congress is concerned that businesses are evading billions of dollars in taxes by not reporting or underreporting electronic (e.g., credit card) sales transactions. To collect lost tax revenue attributable to these transactions, legislators included a provision in the recently enacted Housing Act. It will require credit and debit card issuers and third-party settlement organizations to report sales-related information to the IRS.

Changes to the Home Sale Gain Exclusion:

Many taxpayers bought a second home, such as a vacation home, with the intention of later converting the second home into their principal residence. Under pre-2008 Housing Act law, those taxpayers could have excluded up to $250,000 ($500,000 for certain joint filers) upon a later sale of that former vacation home as long as the two-year ownership and use tests for the exclusion were satisfied. However, the Housing Act recently changed the method for recognizing post 2008 gain on the sale of a principal residence formerly used as a vacation or second home.

Payments in Lieu of Dividends:

Some investors with margin accounts may get an unpleasant surprise at tax time. When the owner of stock lends that stock to a short seller who uses it to cover a short sale, any dividends paid while the loan is outstanding will be sent to the short seller’s buyer.