Sunday, January 12, 2014

3 tax benefits of home ownership threatened in 2014

Marion Franke for The Courier writes:  If Congress fails to renew certain tax benefits of home ownership, homeowners could pay for their failure to act. For decades, the government has tried to take away the tax benefits of home ownership. Even the basic mortgage interest deduction has been considered for cutting the budget.
The Realtor community continues to fight for the rights of homeowners and currently the basic right to deduct mortgage interest is still available (Be sure to get the advice of a qualified financial professional to learn your specific deductions). We believe that balancing the budget on the backs of homeowners is bad for our country and economy. After all, homeowners already pay more than 80 percent of the federal income taxes collected.
These three tax benefits have not been renewed:
Tax Credits Home Energy Improvements: Last year, Congress extended the tax credit for energy-efficiency improvement through 2013, but it expired Dec. 31. If you have not already claimed a credit of $500 or more for qualified improvements since 2005, your ability to claim the credit may be over.]]>
To claim the credit, the improvements must meet very specific energy-efficient requirements. The tax breaks are complex, so look at all your receipts and manufacturer’s certifications to determine whether you qualify for a previous year.
Private Mortgage Insurance Deduction: Currently, the mortgage insurance premiums a home-owner pays is treated the same as mortgage interest. This affects more than 4 million taxpayers who use PMI to enable them to purchase a home with less than a 20 percent down payment.]]>
According to H&R Block, taxpayers deducted $5.6 billion in PMI deductions in 2010. This deduction applied to conventional Fannie Mae and Freddie Mac loans plus Federal Housing Administration insured and Veterans Administration guarantee fees. Next year, the FHA has made changes to insurance fees to extend the life of the loan; and the fees are also higher than in previous years.
Mortgage Forgiveness Debt Relief Act: In our area, few homeowners are still threatened with foreclosure. However, those who do face the sad circumstance can get insult added to the injury if the debt forgiveness act is not renewed.]]>
The IRS considers any forgiven debt as ordinary income. So, a family could lose their home, trash their credit and then be hit with a tax bill from the IRS. Since 2007, struggling homeowners have not had to worry about this scenario. For those who are working with the bank to get a loan modification or short sale, their tax liability may have increased thousands of dollars than if the transaction were completed before the end of 2013.

Experts are claiming there is no sign of Congress extending these tax benefits. There simply is not enough “political will” to see them reinstated. There is no formal bill pending to extend them.


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