The mortgage bailout sections of Congress's massive federal housing bill have gotten all the attention in the press, but there are two tax provisions tucked away that could prove far more significant for some home buyers and realty professionals.

First-time buyers would get a tax credit of 10 percent of the purchase price of the home - up to a maximum of $8,000 - to encourage them to get off the sidelines and help reduce the unsold inventories of properties currently weighing down many local markets.

The tax credit would reduce buyers' federal tax bills, dollar for dollar, for the year of the purchase.

A second form of new tax benefit would be available to millions of home owners who do not itemize on their federal tax filings. They are in line to receive a $500 to $1,000 "standard" annual deduction for the real property taxes they pay but currently can't write off.

The $1,000 deduction would be for married homeowners filing jointly; the $500 maximum would be for single filers.

Now as with all seeming gift packages from Capitol Hill, you need to read the fine print of the legislation because there are some key limitations.

For example, on the new tax credit, the $8,000 maximum is limited to married home buyers who file their taxes together. Singles get maxed out at $4,000.

By the way, the credit isn't free. It's more like a loan. You've got to repay it to the IRS over a fifteen year period that starts one year after you close on the purchase. Each year of the fifteen, you're required to repay six and two-thirds percent of the original tax credit amount.

If you sell the house within the first year, you don't qualify for any credit whatsoever. If you sell later, you're liable for taxes on any remaining amounts of the credit you haven't already repaid, but not beyond your capital gain - if any - on the sale.

Finally in the fine print -- and this is good news -- the definition of "first time buyer" isn't necessarily what you think. You can still qualify for the credit even if you've bought and owned homes before.

You just can't have owned a house any time in the three years preceding your latest purchase.

Published: June 30, 2008

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.