Here are tips for navigating the maze of changes in '08 tax code

ByABC News
February 5, 2009, 11:09 PM

— -- Just as no two snowflakes are alike, no two tax years are the same. Last year, Congress made more than 500 changes to the tax code, according to tax publisher CCH.

Fortunately, you probably won't have to wrestle with all of them when you file your 2008 taxes. But there are some changes you should be aware of, because they could increase the size of your refund, or shrink your tax bill. Here's what's new:

Larger standard deduction for homeowners

One of the benefits of owning a home is that you immediately become eligible for a raft of tax breaks. You can deduct interest payments on your mortgage, along with your state and local property taxes. In the past, though, these deductions were limited to homeowners who itemized.

This year, homeowners will be allowed to increase their standard deduction by the amount of their state and local real estate taxes, up to $500, or $1,000 for married couples who file jointly.

The main beneficiaries of this tax break will be homeowners who have paid off most or all of their mortgages, says Robert Houskeeper, an accounting professor at San Diego State University. These homeowners are still required to pay property taxes, he says, but in many cases, they don't have enough deductions to justify itemizing.

First-time home buyer's credit

To encourage more people to buy homes for the first time, Congress created a $7,500 credit for homes purchased between April 9, 2008, and July 1, 2009. Taxpayers who purchase a home during the first six months of this year are allowed to treat the purchase as if it were made on Dec. 31, 2008, and claim the credit on their 2008 tax return.

But the term "tax credit" is a misnomer, because it's really an interest-free loan. Taxpayers who claim the credit will be required to pay it back in equal installments over 15 years, starting in the second year after the home is purchased. Taxpayers who sell their homes before 15 years have elapsed are liable for the balance, unless they sell at a loss.