Housing Bill Offers Breaks for Taxpayers

The federal housing and foreclosure relief legislation just signed into law by President Bush contains a little-noticed—but potentially far-reaching—change in real-estate tax policy.

It permits millions of homeowners who don't itemize on their federal tax filings to claim a deduction for at least part of their local and state property taxes. Though the House version set the maximum write-off at $350 a year for single taxpayers and $700 for married joint filers, the Senate's $500 and $1,000 prevailed.

The new legislation effectively adds another tax preference for people who own houses while offering nothing to those who rent. The idea, say supporters, is to provide greater tax fairness for a huge category of owners — often seniors and lower-to moderate-income households — who opt for the standard deduction but pay local and state property taxes.

Critics say the plan is just another example of the government's inequitable approach to housing policy — overemphasizing the financial benefits of homeownership versus renting.

What do you think? Does this new legislation discriminate against those who cannot afford to own a home? Is this fair legislation? We'd love to hear your opinion. Use the comment link below to sound off on this topic.

Taxes: Your Odds for an Audit

If you've already filed your taxes this year, and are now relaxing for another year, don't get too comfortable just yet. Seems the IRS is now auditing more taxes than ever, and the number is only expected to get larger in the future.

Being rich has some fairly obvious advantages. But there are also drawbacks. For example, this time of year when a big income may mean bigger odds of an audit.

Money Editor Stacy Johnson takes a look at your odds of an audit in this short video. (Clip runs 1:16)

Do you worry about an audit on your taxes? Do you use an accountant thinking that might save you from getting that dreaded audit letter? We'd love to hear your opinion on this. Use the comment link below to tell us what you think.

Taxes: Adjusting Your Withholding

Tax refunds don't always mean good news… Sometimes, no news is good news.  Stacy Johnson explains…

(video runs 1:20)

Tax Changes in 2008

New changes to the tax law will lower your taxes in 2007, but raise them in 2008.  Learn about those changes in this short video (runs 1:21) 

If you have questions or comments, contact us using the "comment" link below.  Your privacy is protected.  We NEVER publish anyone's email address on this site.  So go ahead… leave a thought or two.

New Tax Breaks Will Aid Some Homeowners

Before filing your federal income-tax return, check to see if you're eligible for a few new breaks.

Among them is a deduction for private mortgage insurance premiums. Claim it on Schedule A, line 13. The insurance must be "in connection with home-acquisition debt," the IRS says. Premiums paid on a contract issued before the beginning of 2007 don't count.

Also, there are income limits that prevent upper-income taxpayers from qualifying. The deduction begins to disappear once your adjusted gross income exceeds $100,000 ($50,000 if you're married and filing separately).

If your adjusted gross income is more than $109,000, or $54,500 if married filing separately, you can't deduct any mortgage-insurance premiums.

Separately, a much needed new break could help homeowners with mortgage debt that was forgiven, either partly or entirely, by lenders.  It's easy to overlook this change since it was enacted so recently — and it's tricky.  Here's the gist:

Normally, if a lender forgives your debt, that's considered taxable income to you (although there are several exceptions to this general rule).  Under a law enacted Dec. 20, 2007, known as the Mortgage Forgiveness Debt Relief Act of 2007, taxpayers may exclude from gross income debt that was forgiven on their principal residence for "qualified" mortgage debt up to $2 million (or $1 million for a married person filing a separate return).

This exclusion applies to debt forgiven during 2007, 2008 or 2009.  There are many complex details.  For more information, see IRS Form 982 and the instructions at the IRS web site.