Senate Bill Extends Tax Provisions for Homeowners
Filed under: Mortage Industry News
In important news in the mortgage industry, the Senate last week approved a bill that retroactively extends over 50 tax provisions for one year. One of these protects homeowners from paying taxes on any mortgage debt forgiven if they had a short sale.
Under the bill, homeowners will be able to deduct the cost of mortgage insurance premiums on their 2014 tax forms. The tax break covers private mortgage insurance premiums and premiums paid on Federal Housing Administration (FHA), Department of Veterans Affairs, and Rural Housing Service guaranteed loans.
In a statement from private mortgage companies, the United States Mortgage Insurers “commends passage by Congress last [week] of a one year extension of vital homeowner tax relief. We are especially pleased that the legislation includes the tax-deductible treatment of mortgage insurance premiums for low and moderate income borrowers. We look forward to working with Congress towards permanent enactment of this important tax relief for homeowners.”
In addition, the bill also ensures borrowers that are underwater on their loan that sold their homes in a short sale in 2014 will not be penalized.
Previously, homeowners had to pay taxes on any mortgage debt that was canceled or forgiven by a lender.
Isaac Boltansky, analyst with Compass Point, said in the report, that the “Mortgage Forgiveness Debt Relief Act is crucial to foreclosure mitigation efforts such as principal forgiveness and short sales.”
Since 2008, it is reported that more than 800,000 “distressed” homeowners have taken advantage of the tax break.
House and Senate lawmakers were close to a deal on a two-year extension, but the White House objected due to key business tax provisions being given permanent status while others affecting low and moderate income households would still have had to be extended each year.
Senator Ron Wyden, chairman of the Senate Finance Committee said, “In my view, any agreement on permanent tax policies must be balanced between support for businesses and support for working families. A deal that only makes corporate policies permanent–or one sharply skewed in that direction–would have failed the test of fairness.”
The report also stated that short sales have been on the decline over the past few years, mainly because the economy has been improving, lower amount of foreclosures, and the uncertainty over tax consequences of a short sale or deed in lieu transaction.
Remember to always consult a tax professional, but if you have questions, feel free to give me a call.
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