The “temporary” nature means that the credit MUST be repaid back in equal installments over 15 years, or sooner if the home is sold before then; in which case the remainder is generally due immediately upon sale.   The “First-time” nature means that the homebuyer, (and spouse) had no ownership interest in a principal residence during the three-year period before the closing date of the current home purchase.

Renters who do NOT own a principal residence (a rental or vacation home) qualify because the qualified ownership is only to principal residences.   The “refundable” nature means that the taxpayer will receive a refund of the excess homeowners’ tax credit not used on that return where the credit is claimed.

If two or more unmarried taxpayers purchase the residence, the credit may be allocated (split) among the owners, but not to exceed the total amount of the eligible credit.   If any taxpayer sells the home before the end of the tax year in which the credit would be allowed the credit will be disallowed and must be repaid back in full.   Nonresident aliens will not be allowed to take the credit, nor those who take the District of Columbia first-time homeowner tax credit.   The credit will be disallowed if the home is purchased from certain related persons.

If the taxpayer sells or no longer uses the home as principal residence (converts to rental) before repaying the credit, the unpaid full balance becomes due in the year of the conversion or sale.   However, the amount of the recaptured credit may not exceed the amount of gain from any sale to an unrelated person.   The credit does not have to be repaid if the taxpayer dies.   Special rules exist if the residence becomes incident to a divorce.

A property tax deduction is allowed to non-itemizers; meaning those who do not itemize deductions can take up to $ 1,000 deduction for state and local property taxes to married couples filing jointly ($ 500 for single taxpayers or heads of households.   The deduction is an addition to their Standard Deduction.   This rule is in effect for Tax Year 2008 only!

There are other rules changes to the Low-Income Housing Tax Credit for developers and Tax Exempt Housing Bonds for investors.

Corporations can benefit from the new law by being able to use accumulated and unused AMT and Research & Development credits by electing not to use the 50% bonus depreciation allowed under the Economic Stimulus Act of 2008 (the Rebate Check Program Act).

One last highlight of this Act requires banks to begin reporting merchants credit and debit card revenue payments received during the year to the IRS beginning January 1, 2011.   The banks will be required to also report the merchants’ name, address and Employer Identification Number or Social Security Number.   This will be a strong incentive for merchants to correctly report income.