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Homeowner Tax Breaks Unlikely To Pass Before Midterm Elections
Millions of U.S. homeowners lost two important tax benefits this year and Congress is unlikely to renew them before heading home for midterm elections.
The federal tax deduction for private mortgage insurance (PMI) lets you deduct the cost of PMI premiums if you itemize your deductions. It phases out when your adjusted income tops $100,000.
The mortgage debt forgiveness tax provision protects homeowners who lose their home via foreclosure and those who sell for less than they owe on their mortgage (a short sale). Without it, any debt forgiven by your mortgage lender is taxable income.
For example, if your lender loses $100,000 on your short sale, foreclosure or deed-in-lieu of foreclosure, you could end up owing tax on that $100,000 because money a lender “forgives” is taxable income. A.law that set aside the mortgage debt forgiveness tax ended in 2013.
National Association of Realtors officials say it’s unlikely Congress will act to extend either the mortgage debt or the PMI deduction tax provisions before the midterm elections.
“The (mortgage tax forgiveness) tax relief expired on Dec. 31 of last year and unless Congress acts to extend it, every person who has already sold or plans to sell a home in a short sale in 2014 will pay taxes on nonexistent mortgage debt, which is money many don’t have,” NAR President Steve Brown said.
Congress probably will pass legislation at some point later this year and make it retroactive, NAR lobbyists say.
That’s happened in past years, but there are no guarantees in politics, particularly in an election year when those who lost and those who are retiring return for a Lame Duck session along with those who were re-elected.