Mortgage Insurance Deduction Bill Makes Progress on Capitol Hill
September 26th, 2007
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On a voice vote, the House Ways & Means Committee has passed H.R. 3648. This bill, which must now cleared by the full House and the Senate, is important for two reasons.
First, those who purchased homes with financing that required FHA, VA or private mortgage insurance were able, for the first time, to deduct insurance premiums from federal taxes during the past year. This benefit only applied to loans made after January 1, 2007 and it was a temporary benefit — something scheduled to sunset at the end of the year.
H.R. 3648, which is introduced by Rep. Charles Rangel (D-NY), extends the mortgage insurance premium write-off for another seven years, until December 31, 2014. In effect, if this bill passes through the legislative process it will mean that deductions for mortgage insurance premiums will essentially become permanent.
Also, the bill resolves a huge source of irritation in the tax code. Under present rules if you have a loss on the sale of a home, say by foreclosure, the loss may well be regarded as “imputed income,” income which is taxable. However, under H.R. 3648 such losses would no longer be regarded as taxable income.
As always it will be interesting to see what the final bill language says, assuming that there is a final bill. In this case, however, passage is about as close to a lock as these things get on Capitol Hill.
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