On July 30, 2008, President George W. Bush signed the American Housing Rescue and Foreclosure Prevention Act into law. Tax reductions aimed at stimulating the failing housing market dominated the act's provisions. New homeowners, those who pay property taxes, builders who construct low-income rental housing units and investors who floundered in the sub-prime-loan market, could potentially benefit from this piece of legislation.
First-Time Homebuyer Credit
One of the main provisions of the American Housing Rescue and Foreclosure Prevention Act, commonly referred to as the Foreclosure Prevention Act, was the homebuyer tax credit. The refundable credit was developed to assist citizens in making a down payment on a first home. The credit topped out at $7,500. Those who took the credit have to repay the credit over a 15-year period.
Additional Property Tax Deduction
The FPA also allowed taxpayers an additional standard deduction of $500 to cover state and local property taxes. The deduction increased to $1,000 for those couples who filed married filing jointly. This provision of the act was for the 2008 tax year only.
Low-Income Housing tax Credit
To promote the development of affordable rental housing, FPA temporarily increased the current low-income housing tax credit from $2 per person in a state, by an additional 10 percent. The act also decreased the paperwork associated with the credit and simplified the application process in hopes of recruiting more builders into the affordable-rental housing market.
Increase in Mortgage Revenue Bonds
Another major aspect of this act allowed for the issuance of $11 billion in tax-exempt bonds aimed at refinancing subprime loans, and making loans on reclaimed homes available to low- to moderate-income citizens. Lenders could also use the additional funding from the bond issue to provide loans for first-time homebuyers and to assist in the financing for construction of low-income rental housing.
Other Provisions
If a business lost money in 2009 or 2009, the act allowed a refund of taxes the business paid over the past four year as opposed to current law that allows credit over the past two years. The FPA also allows for special handling of military members who face foreclosure action upon returning from service overseas. This act also provides tax breaks for homeowners and businesses rebuilding after Hurricane Katrina and other Congress-qualified natural disasters.
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