Stimulus Payments and Tax Law Changes

Taxpayers were instructed to retain a copy of the notice that included the stimulus payment for purposes of computing their 2008 tax returns. The estimated payments were computed based on information from the 2007 tax return. Double check the notice to be sure that the estimated stimulus payments were computed correctly. Any shortfalls can be recovered in 2009 when filing the 2008 return.

Family additions born in 2008 would not have been considered in the estimated stimulus payments. Do not overlook claiming the potential $300 refundable credit for each child.

Taxpayers filing 2007 returns after the extended October 15 due date are not entitled to receive a stimulus payment in 2008 until after they file their 2008 tax return.

Taxpayers who reside in federally declared disaster areas have an extended due date beyond October 15. For example, victims of Hurricane Ike have until January 5, 2009, to file their 2007 income tax return. There again, taxpayers will not receive a stimulus payment until after filing their 2007 return.

Congress passed the Mortgage Forgiveness Debt Relief Act of 2007 in December of that year to assist taxpayers avoiding foreclosure procedures and those afflicted as a result of the decline in the housing market. The law change excluded up to $2 million of cancellation of-debt income related to their mortgages on their principal residences, not including second or vacation homes.
The law only applies to acquisition indebtedness and refinanced debt that does not exceed the amount of acquisition refinanced debt.

Amendments to the Mortgage Forgiveness Debt Relief Act of 2007, passed in July of 2008, created a first time home buyer credit of up to $7,500 to eligible taxpayers. The credit is refundable and is repaid ratably in future years (up to 15 years for quailing taxpayers with full credit). Repayments do not begin until 2010 for homes purchased in 2008. This is an interest free loan for taxpayers facing the tight credit market that currently exists. In addition, some tax incentive credits for homes purchased in 2009 may not have to be repaid.

Please be advised that this website is a general information resource, and it is not intended to provide legal advice in your particular case. You should consult with an attorney to obtain legal advice regarding your matter.