Short title

This Act may be cited as the

Keep Our Homes Act of 2008

Temporary deduction for certain mortgage counseling

(a)

In general

Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to additional itemized deductions) is amended by redesignating section 224 as section 225 and by inserting after section 223 the following new section:

224.

Certain mortgage counseling

(a)

In general

In the case of an individual, there shall be allowed as a deduction an amount equal to the amount paid or incurred by the taxpayer during the taxable year for qualified mortgage counseling. (b)

Limitation

The deduction allowed under subsection (a) shall not exceed $500 for any taxable year. (c)

Qualified mortgage counseling

For purposes of this section, the term qualified mortgage counseling means any mortgage counseling provided by an organization accredited by the Federal Housing Administration to provide such counseling if such counseling is obtained before the issuance of the loan with respect to which such counseling relates. Such term shall not include any counseling if such counseling is provided with respect to a loan which is not secured by the principal residence (within the meaning of section 121) of the taxpayer. (d)

Termination

The deduction under this section shall not be allowed with respect to any amount paid or incurred after December 31, 2012.

(b)

Deduction allowed in computing adjusted gross income

Subsection (a) of section 62 of such Code is amended by inserting before the last sentence the following new paragraph:

(21)

Certain mortgage counseling

The deduction allowed by section 224.

(c)

Clerical amendment

The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by redesignating the item relating to section 224 as an item relating to section 225 and inserting before such item the following new item:

Sec. 224. Certain mortgage counseling.

(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2007.

Temporary deduction for upside down mortgages

(a)

In general

Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to additional itemized deductions), as amended by this Act, is amended by redesignating section 225 as section 226 and by inserting after section 224 the following new section:

225.

Upside down mortgages

(a)

In general

In the case of an individual, there shall be allowed as a deduction an amount equal to 20 percent of the excess (if any) of— (1)the acquisition indebtedness (within the meaning of section 163) as determined at the close of the taxable year with respect to the principal residence (within the meaning of section 121) of the taxpayer, over (2)the valuation (as in effect at the close of such taxable year) of such residence as determined for purposes of State and local real property tax assessments. (b)

Limitation

The deduction allowed under subsection (a) shall not exceed $5,000 for any taxable year. (c)

Denial of benefit for fraudulently obtained mortgages

Acquisition indebtedness shall not be taken into account under subsection (a) if material misstatements were made by the taxpayer in obtaining such indebtedness. (d)

Termination

The deduction under this section shall not be allowed with respect to any amount paid or incurred after December 31, 2009.

(b)

Deduction allowed in computing adjusted gross income

Subsection (a) of section 62 of such Code, as amended by this Act, is amended by inserting before the last sentence the following new paragraph:

(22)

Upside down mortgages

The deduction allowed by section 224.

(c)

Clerical amendment

The table of sections for part VII of subchapter B of chapter 1 of such Code, as amended by this Act, is amended by redesignating the item relating to section 225 as an item relating to section 226 and inserting before such item the following new item:

Sec. 225. Upside down mortgages.

(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2007.

Temporary credit for certain home purchases

(a)

Allowance of credit

Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to nonrefundable personal credits) is amended by inserting after section 25D the following new section:

25E.

Credit for certain home purchases

(a)

Allowance of credit

(1)

In general

In the case of an individual who is a purchaser of a qualified principal residence during the taxable year, there shall be allowed as a credit against the tax imposed by this chapter an amount equal to the lesser of— (A)10 percent of the purchase price of the residence, or (B)$7,500 ($9,000 if such residence is in a high cost area (as determined by the Secretary of Housing and Urban Development)). (2)

Allocation of credit amount

The amount of the credit allowed under paragraph (1) shall be equally divided among the 2 taxable years beginning with the taxable year in which the purchase of the qualified principal residence is made. (b)

Limitations

(1)

Date of purchase

The credit allowed under subsection (a) shall be allowed only with respect to purchases made— (A)after the date of the enactment of this section, and (B)before the date that is 12 months after such date. (2)

Limitation based on modified adjusted gross income

(A)

In general

The amount allowable as a credit under subsection (a) (determined without regard to this paragraph) for the taxable year shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which is so allowable as— (i)the excess (if any) of— (I)the taxpayer’s modified adjusted gross income for such taxable year, over (II)$70,000 ($140,000 in the case of a joint return), bears to (ii)$20,000. (B)

Modified adjusted gross income

For purposes of subparagraph (A), the term modified adjusted gross income means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933. (3)

Limitation based on amount of tax

In the case of a taxable year to which section 26(a)(2) does not apply, the credit allowed under subsection (a) for any taxable year shall not exceed the excess of— (A)the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over (B)the sum of the credits allowable under this subpart (other than this section and section 23) for the taxable year. (4)

One-time only

(A)

In general

If a credit is allowed under this section in the case of any individual (and such individual's spouse, if married) with respect to the purchase of any qualified principal residence, no credit shall be allowed under this section in any taxable year with respect to the purchase of any other qualified principal residence by such individual or a spouse of such individual. (B)

Joint purchase

In the case of a purchase of a qualified principal residence by 2 or more unmarried individuals or by 2 married individuals filing separately, no credit shall be allowed under this section if a credit under this section has been allowed to any of such individuals in any taxable year with respect to the purchase of any other qualified principal residence. (c)

Qualified principal residence

For purposes of this section— (1)

In general

The term qualified principal residence means any residence that is purchased to be the principal residence of the purchaser. (2)

Principal residence

The term principal residence has the same meaning as when used in section 121. (d)

Denial of double benefit

No credit shall be allowed under this section for any purchase for which a credit is allowed under section 1400C. (e)

Recapture in the case of certain dispositions

In the event that a taxpayer— (1)disposes of the qualified principal residence with respect to which a credit is allowed under subsection (a), or (2)fails to occupy such residence as the taxpayer's principal residence,

at any time within 24 months after the date on which the taxpayer purchased such residence, then the remaining portion of the credit allowed under subsection (a) shall be disallowed in the taxable year during which such disposition occurred or in which the taxpayer failed to occupy the residence as a principal residence, and in any subsequent taxable year in which the remaining portion of the credit would, but for this subsection, have been allowed.

(f)

Special rules

(1)

Joint purchase

(A)

Married individuals filing separately

In the case of 2 married individuals filing separately, subsection (a) shall be applied to each such individual by substituting $3,500 for $7,000 in paragraph (1) thereof. (B)

Unmarried individuals

If 2 or more individuals who are not married purchase a qualified principal residence, the amount of the credit allowed under subsection (a) shall be allocated among such individuals in such manner as the Secretary may prescribe, except that the total amount of the credits allowed to all such individuals shall not exceed $7,000. (2)

Purchase; purchase price

Rules similar to the rules of paragraphs (2) and (3) of section 1400C(e) (as in effect on the date of the enactment of this section) shall apply for purposes of this section. (3)

Reporting requirement

Rules similar to the rules of section 1400C(f) (as so in effect) shall apply for purposes of this section. (g)

Basis adjustment

For purposes of this subtitle, if a credit is allowed under this section with respect to the purchase of any residence, the basis of such residence shall be reduced by the amount of the credit so allowed.

(b)

Conforming amendments

(1)Section 24(b)(3)(B) of the Internal Revenue Code of 1986 is amended by striking and 25B and inserting , 25B, and 25E. (2)Section 25(e)(1)(C)(ii) of such Code is amended by inserting 25E, after 25D,. (3)Section 25B(g)(2) of such Code is amended by striking section 23 and inserting sections 23 and 25E. (4)Section 25D(c)(2) of such Code is amended by striking and 25B and inserting 25B, and 25E. (5)Section 26(a)(1) of such Code is amended by striking and 25B and inserting 25B, and 25E. (6)Section 904(i) of such Code is amended by striking and 25B and inserting 25B, and 25E. (7)Subsection (a) of section 1016 of such Code is amended by striking and at the end of paragraph (36), by striking the period at the end of paragraph (37) and inserting , and, and by adding at the end the following new paragraph:

(38)to the extent provided in section 25E(g).

(8)Section 1400C(d)(2) of such Code is amended by striking and 25D and inserting 25D, and 25E. (c)

Clerical amendment

The table of sections for subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 25D the following new item:

Sec. 25E. Credit for certain home purchases.

(d)

Effective date

The amendments made by this section shall apply to purchases in taxable years ending after the date of the enactment of this Act. (e)

Application of EGTRRA sunset

The amendment made by subsection (b)(1) shall be subject to title IX of the Economic Growth and Tax Relief Reconciliation Act of 2001 in the same manner as the provisions of such Act to which such amendment relates.

Temporary additional standard deduction for real property taxes for nonitemizers

(a)

In general

Section 63(c)(1) of the Internal Revenue Code of 1986 (defining standard deduction) is amended by striking and at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting , and, and by adding at the end the following new subparagraph:

(C)in the case of any taxable year beginning in 2008 or 2009, the real property tax deduction.

(b)

Definition

Section 63(c) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(8)

Real property tax deduction

(A)

In general

For purposes of paragraph (1), the real property tax deduction is so much of the amount of the eligible State and local real property taxes paid or accrued by the taxpayer during the taxable year which do not exceed $500 ($1,000 in the case of a joint return). (B)

Eligible State and local real property taxes

For purposes of subparagraph (A), the term eligible State and local real property taxes means State and local real property taxes (within the meaning of section 164), but only if the rate of tax for all residential real property taxes in the jurisdiction has not been increased at any time after April 2, 2008, and before January 1, 2009.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2007.

Temporary exclusion of unemployment compensation from gross income

(a)

In general

Section 85 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

(c)

Temporary exclusion

Notwithstanding subsection (a), in the case of unemployment compensation received by an individual during 2008 or 2009, gross income shall not include such compensation.

(b)

Effective date

The amendments made by this section shall apply to amounts received after December 31, 2007.